Source The guardian
The standoff between the 14th Floor and the Oval Office has shifted from verbal sparring to a constitutional showdown. Fed Chair Jerome Powell’s refusal to resign—coupled with his direct condemnation of the DOJ’s tactics—marks a historic moment in the relationship between the U.S. government and its central bank.
Markets React to the Friction
Wall Street has watched the escalating feud with growing anxiety. While investors generally favor lower interest rates, the prospect of a politically compromised Federal Reserve has triggered volatility in the bond markets. Economists warn that if the “Fed Independence” precedent is shattered, the long-term credibility of the U.S. Dollar could be at risk.
Indicator Market Reaction Sentiment
S&P 500 Initial dip followed by recovery Uncertain
10-Year Treasury Yields spiked 15 basis points Volatile
Gold Up 2.2% Safe Haven Seeking
The Legal Battlefield
Constitutional scholars are now debating the limits of presidential power. While a President can fire a Fed Chair “for cause,” the definition of “cause” has traditionally been limited to legal or ethical malfeasance, not policy disagreements. By framing the headquarters renovation as a criminal matter, the administration appears to be building a dossier to justify a formal removal.
The Fed’s Defense: Powell has retained a powerhouse legal team to argue that the subpoenas are an “abuse of process.”
Congressional Response: Democrats and a handful of moderate Republicans have called for an emergency hearing to protect the Fed’s autonomy.
The White House Stance: Press Secretary statements continue to insist that “no public official is above the law,” maintaining that the investigation is purely about fiscal transparency.
What Happens Next?
Powell’s current term as Chair does not expire until May 2026. If he remains in his post despite the investigation, the Fed is expected to hold rates steady at its next meeting, further signaling that it will not be swayed by political pressure. However, if the DOJ moves toward a formal indictment, the U.S. will enter uncharted legal territory that could take years to resolve in the Supreme Court.
