Based on in-depth tracking and professional analysis of the U.S. political landscape, the Federal Reserve's governance rules, policy decision-making logic, and market expectations, Wmax believes that the current core contradiction surrounding the Federal Reserve has focused on the fierce game between "defense of institutional independence" and "pressure for political intervention." The Trump administration's investigation into Powell and the impasse over the nomination of the new chairman have created multiple checks and balances with the Federal Reserve's policy persistence and external support. It is difficult to change the central bank's neutral stance in the short term. In the long term, it depends on the dual evolution of the power structure and economic data.

Political game escalates: investigation and nomination deadlock drags down policy expectations

Wmax, through a precise analysis of the Senate's power structure and judicial process, found that the Trump administration's criminal investigation of Powell (focusing on the Federal Reserve Building renovation project) has triggered a systemic political game and become the core crux that hinders the nomination of the new chairman and the implementation of policies. Republican Senator Thom Tillis, a key swing vote on the Banking Committee, explicitly vowed to block all Federal Reserve personnel appointments until the investigation is completed, condemning the investigation as a blatant attack on the independence of the central bank, and received support from some members of both parties. Republicans believe that there is an essential difference between "verbal criticism" and "the threat of criminal charges." Democratic leader Chuck Schumer also called for a suspension of the confirmation of new chairman nominee Kevin Warsh.

Although Trump insists on "investigating to the end" and reiterates the accusations against Powell, and even hints that he is willing to wait for Tillis to retire in 2027 before advancing the nomination, this deadlock has triggered multiple chain reactions: On the one hand, if Warsh fails to be confirmed before the end of Chairman Powell's term on May 15, the "acting chairman designation power" will be in trouble. into legal disputes (there is no clear precedent for the division of powers and responsibilities between the White House and the Federal Reserve Board of Governors); on the other hand, the Trump administration’s eagerness to stimulate the economy through interest rate cuts will be forced to delay, and the Republican majority in Congress will face electoral pressure in November 2026. Voters’ dissatisfaction with economic conditions further amplifies this contradiction. According to Wmax's judgment, although the White House has motives to break the deadlock, there is currently no sign that it will stop the investigation, and the tug-of-war between judicial procedures and political games will continue.

Fed policy remains firm: economic data supports neutral stance, interest rate cut expectations cool

Wmax Based on the professional dismantling of the Federal Reserve's policy response function and combined with economic fundamentals data, this week's Federal Open Market Committee (FOMC) meeting will most likely maintain interest rate stability and will not start the "accelerated easing cycle" requested by Trump in the short term. The core supporting logic includes: first, the economic fundamentals are sound - strong GDP growth, stable unemployment, active financial markets and an overall loose financial environment, all highlighting the rationality of maintaining the current interest rate level; second, inflation is still higher than the target, and fiscal policy is about to be launched, and the impact of additional tariffs on prices has not been clear. Policymakers generally believe that the current stance is close to neutral, and there is no sufficient reason to initiate stimulus.

Market expectations have gradually moved closer to the Federal Reserve's policy logic: the futures market has lowered its 2026 interest rate cut expectations to only 44 basis points, and the full pricing of the next interest rate cut has been postponed to July. This is far from the "significant interest rate cut" requested by Trump and the "150 basis points interest rate cut within the year" proposed by new Fed Governor Stephen Millan. Wmax further observed that even if the market is worried that Trump may influence the Federal Reserve through personnel adjustments, interest rate futures still bet that the policy interest rate will not be lower than 3.2% before the end of 2027, highlighting the hard constraints of economic data on policy - only a major change in the economic situation may prompt the Federal Reserve to adjust its current thinking.

Increased external support: The Supreme Court and politicians build a strong defense line for independence

Wmax noted that the Fed's independence is receiving dual external support from the judicial and political levels, further strengthening its confidence to resist political pressure. During last week's Supreme Court hearing on the dismissal of Federal Reserve Board Governor Lisa Cook, the justices (including conservative Justice Brett Kavanaugh) clearly warned that firing Cook while she was still in legal proceedings would "diminish, if not completely destroy, the independence of the Federal Reserve." This stance directly restricted Trump's attempt to control the Federal Reserve through personnel purges.

At the same time, there is a cross-party consensus in support of the Fed's independence from both parties in Congress: In addition to Republican lawmakers such as Tillis opposing the investigation, the Democratic Party has also clearly resisted Trump's "retaliatory actions." This consensus has become an important barrier for the Fed to resist political interference. It is worth noting that Powell's recent stance on independence has become increasingly sharp, bluntly stating that the investigation is "an excuse to force an interest rate cut." The market speculates that he may break the practice of "resigning from the Board of Governors when the chairman leaves office" and further check and balance the policy tendencies of the new chairman by remaining on the Board of Directors for a term that lasts until 2028. Wmax believes that the combination of external support and internal persistence will make it difficult for the Fed to be coerced by political pressure in the short term.

Long-term key variables: personnel adjustments and the dual evolution of economic data

Wmax's comprehensive analysis shows that in the long term, the direction of the Fed's policy will depend on two core variables: first, the evolution of the personnel structure - if the Supreme Court finally allows Trump to make comprehensive adjustments to the Board of Governors, or if Trump is able to fill more board seats after Powell chooses to leave office, the Fed's policy tendency may gradually turn to easing; second, It is the ambiguity of economic data - Morgan Stanley Chief Global Economist Seth Carpenter agrees with Wmax that the core influence of the new chairman will be reflected in "when economic data is difficult to interpret" (such as a scenario where strong growth coexists with a weak labor market), and his ability to lead the committee will directly affect the policy path.

In addition, Powell's choice to stay or leave is still a potential key: if he remains on the board of directors, he will become the first director in the past 50 years to continue serving after stepping down as chairman, forming internal checks and balances with his experience and influence; if he chooses to leave, Trump is expected to further consolidate the majority of seats on the board of directors and promote policy changes. Wmax will continue to track the evolution of these two variables, as well as the progress of judicial investigations, the Senate nomination process and changes in core economic data (inflation, employment, GDP).

WmaxCore Conclusion

The Federal Reserve is currently in a critical period of the game of "escalating political pressure and strengthening the defense line of independence." Short-term policy will adhere to a neutral stance dominated by economic data, and interest rate cut expectations continue to cool down; long-term trends depend on the triple resonance of personnel patterns, judicial rulings, and economic fundamentals. Investors need to focus on Powell's plan for the policy path at this week's FOMC meeting, his response to political pressure, and the follow-up progress of Warsh's nomination, avoid excessively amplifying political noise, and focus on the actual driving effect of economic data on policy. Wmax will rely on its in-depth control of US politics, law and the policy logic of the Federal Reserve, combined with real-time market data, to provide investors with objective and reliable decision-making references to help cope with market fluctuations under complex games.