Trump vs. The Fed: DOJ Subpoenas and Supreme Court Battle Threaten Central Bank Independence

WASHINGTON — Only months before his term as Chairman expires in May, Federal Reserve Chair Jerome Powell finds himself at the center of an unprecedented political and legal storm that threatens to upend the foundational independence of the US central bank.

Following President Donald Trump‘s repeated verbal attacks labeling Powell as “incompetent or dishonest,” the Department of Justice (DOJ) has issued grand jury subpoenas regarding the cost overruns of the Fed’s headquarters renovation.

The Real Threat: The Lisa Cook Case

While the DOJ investigation grabs headlines, legal experts warn that the upcoming Supreme Court hearing on January 21 regarding Fed Governor Lisa Cook poses a systemic risk. The Court will decide if the White House can remove officials “for cause,” potentially dismantling the 1913 Federal Reserve Act and handing control of the FOMC to the Executive Branch.

Market Reaction and Corporate Warnings

Wall Street heavyweights have issued sharp rebukes. JPMorgan CEO Jamie Dimon warned that undermining the Fed “may trigger the opposite effect” by unanchoring inflation expectations. Globally, the ECB and Bank of England have expressed rare solidarity supporting institutional autonomy.

Key Data Points

• Supreme Court Hearing: January 21 (Crucial for Fed independence).
• Prediction Markets: Polymarket data shows a 55% probability that Powell stays on as Governor post-Chairmanship.
• Strategic Timeline: Powell may utilize his term through 2028 to block political rate cuts.
• Market Impact: US Dollar facing headwinds and rising volatility premiums.