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In the run-up to the election, Trump claimed that Powell acted politically by cutting interest rates to help President Biden (an insult, given the organization’s legal independence). Vice President J.D. Vance pushed for more political control over the base interest rate.

While some economists later echoed Trump’s statement that the FOMC should cut interest rates, public anger at Trump was unusual: Trump called him “the very late Powell,” a “stubborn mule,” a “biggest loser,” and a “stupid person.”

Wall Street felt uneasy about the attacks. Even if it wanted to see interest rate cuts, it did not want to see the independence of the central bank threatened. When Trump backed away from the idea of ​​firing Powell, he instead focused on other members of the Federal Open Market Committee. In September, he tried to oust Fed Governor Lisa Cook via social media, alleging she made false statements on a mortgage application. She denies this and has filed her case with the Supreme Court. Hearings begin in January.

Other independent agencies got the message: If Trump is willing to take on the Fed, it could be his turn next.

“How much can really change under one administration?” asked one source. “Three years is a long time yet,” was the response.

January question

Since January, many federal employees inside and outside the Fed have quietly decided that discretion is the better part of valor. To the relief of Wall Street, the Fed’s top figures have not completely disappeared.

Outside of monetary policy, monetary policy leaders have publicly stuck to the script when it comes to policy matters. Time and again, Powell has insisted that key interest rate decisions are made exclusively and entirely based on data about the economy. On the substantive issue in the chamber where the court will hold hearings in January regarding Cook’s dismissal, Powell said it would be “inappropriate” to comment.

Sources say that although the temperature has dropped at the present time, it is preparing to start rising again early next year. The argument that an independent Fed leads to better economic outcomes is widely accepted. But if Trump succeeds in ousting Cook, the Fed’s independence looks less secure – which could lead to inflationary sentiment.

However, analysts’ concerns about the Fed’s independence do not fall to the level of comparisons with President Nixon and Arthur Burns, when consensus on monetary policy between the White House and the Fed plunged the economy into crisis.

Economists more broadly believe there are too many advocates for independence — and too much scrutiny by markets — to allow politicians to try to fundamentally change the Fed’s course, especially if Jerome Powell remains governor.

Selective silence is a tactic that everyone, in the end, seems to be able to agree on. Critics claim that the FOMC — with its vague plans and the breadcrumbs its members sometimes drop in speeches — largely attracts Wall Street’s attention. Treasury Secretary Scott Besent has been pushing for a “back seat” to the Fed, which insiders would be only too happy to oblige.

On the other hand, the Federal Reserve System is charged with answering to congress and, by extension, to the American people. In an era of economic volatility, where business leaders and consumers alike are uncertain about the path forward, a lack of foresight on the part of key decision makers can be harmful and frustrating.

There was also a delicate balance to strike between pushing back on allegations about bias within the Fed and reminding the public that the Fed is primarily focused on and guided by its mandate.

The next Fed Chairman

Another embarrassing question is who is actually in charge. Secretary Bessent has made clear that in his search for a new Fed leader, he wants to appoint a “shadow chair,” someone who will be the real power at the Fed while Powell is increasingly ignored as he approaches the end of his term in May.

This was not a popular idea, but the White House has embarked on a very public hiring process ever since. They said that potentially affected parties are monitoring the most likely candidates, without becoming overly invested in results that may never be achieved.

One concern is that the broadcast nature of the selection process means that pressure is already piling on the shoulders of the potential nominee, who must dispute projections without having much real influence within the central bank.

Wall Street is also bracing for some early bumps. Until the last few meetings, Powell’s round had consistent consensus. As Paul Donovan of UBS said in a note to clients this week: “Perhaps what is most interesting today is the extent of the division within the Fed. This is likely to store trouble for Powell’s successor as Fed chair. A Fed willing to defect under Powell may be more inclined to dissent under a Fed chair who is less respected in the establishment, and in broader financial markets.”

Whatever creases will need to be ironed out under a new federal system, the Trump administration seems keen to do so behind closed doors. For federal workers who want to take tough action without the weight of the White House weighing down on them, a shift in that attention can’t come soon enough.