Fed Poised to Hold Rates as Powell Faces DOJ Probe Pressure

The Federal Reserve is widely expected to leave its benchmark interest rate unchanged at about 3.6% at this week’s Federal Open Market Committee meeting, pausing after three quarter‑point cuts in 2025 despite President Donald Trump’s public demands for faster easing. Chair Jerome Powell is navigating unprecedented political and legal pressure as the Justice Department pursues a criminal investigation into his June 2025 testimony about a $2.5 billion Fed building renovation, with subpoenas he has condemned as a pretext to punish the central bank for not cutting rates more sharply. The Supreme Court has also just heard a case on whether Trump can fire Fed governor Lisa Cook over disputed mortgage‑fraud allegations, with justices signaling skepticism about allowing her summary removal. Even as rate policy remains steady, the Fed is contending with inflation stuck around 2.8% on its preferred gauge and a job market that has cooled but still shows historically low new unemployment claims. Former Fed staffers quoted in the piece say Powell will likely use his post‑meeting press conference to stress that decisions are grounded in economic data, not politics, as markets and the public watch whether the institution can hold the line on independence. The outcome will shape borrowing costs for mortgages, auto loans and business credit, and it’s becoming a proxy test of how much political heat the Fed can withstand in an election‑cycle economy.