NextFin News - On January 28, 2026, the Federal Reserve held interest rates steady in the 3.50%-3.75% range, a move that U.S. central bank chief Jerome Powell described as a response to a solid economy and diminished risks to inflation. However, this technical decision was overshadowed by a deepening political crisis in Washington. According to ABC News, federal prosecutors have launched a criminal investigation into Powell, ostensibly related to his congressional testimony regarding the renovation of Federal Reserve buildings. Powell, in a video message released on January 11, characterized the probe as a "pressure campaign" designed to intimidate the Fed into lowering rates to suit the administration's agenda.
The investigation comes as U.S. President Trump continues to claim that the 2024 election was influenced by central bank policy, frequently accusing Powell of maintaining high rates to hinder his return to office. This narrative of a "rigged" 2024 economy has become a cornerstone of the administration's current efforts to dismantle the Fed's independence. According to Bloomberg, the administration has already attempted to fire Fed Governor Lisa Cook, a move currently being challenged in the Supreme Court, and has nominated Kevin Warsh to eventually take the helm of the central bank. Despite these aggressive maneuvers, a deep dive into the mechanics of monetary policy reveals that even if Powell had harbored the intent to rig the 2024 election, the institutional and economic architecture of the United States would have rendered such an effort impossible.
The primary obstacle to any individual "rigging" the economy is the collective nature of the Federal Open Market Committee (FOMC). The Fed Chair is merely one of twelve voting members on the committee. To manipulate interest rates for political gain, Powell would have needed to suborn a majority of the committee, which includes regional Fed presidents who are not presidential appointees. The Fed’s culture of "data-dependency" acts as a rigorous check; any deviation from what the Consumer Price Index (CPI) or labor market data suggested would have been immediately flagged by the thousands of PhD economists within the system and the global financial markets. In 2024, with inflation still hovering above the 2% target, a sudden, unjustified rate cut would have likely triggered a bond market revolt, sending long-term yields—and mortgage rates—soaring, thereby achieving the exact opposite of the intended political effect.
Furthermore, the "long and variable lags" of monetary policy transmission make it a blunt instrument for electioneering. Economic research consistently shows that changes in the federal funds rate take between 12 to 18 months to fully permeate the real economy. For Powell to have influenced the November 2024 vote, he would have needed to initiate a massive easing cycle in late 2023. At that time, the U.S. was still grappling with the tail-end of the post-pandemic inflationary surge. Any aggressive easing would have risked a second wave of inflation, a political poison that would have harmed the incumbent more than the challenger. The reality is that the Fed’s cautious approach in 2024 was the only path consistent with its dual mandate of price stability and maximum employment.
Looking forward, the current administration's attempt to criminalize policy disagreements poses a significant threat to the "independence premium" that keeps U.S. borrowing costs low. If the Supreme Court sides with the administration in the Cook case, it could signal the end of the Fed's 112-year history of insulation from the executive branch. Market analysts warn that a politicized Fed would lead to higher inflation expectations and a permanent risk premium on U.S. Treasuries. As the 2026 midterms approach, the irony remains that the very independence the administration seeks to destroy is what provided the stable economic backdrop for the 2024 transition of power. The institutional guardrails that prevented Powell from "rigging" the past are the same ones currently being tested by the pressures of the present.
Explore more exclusive insights at nextfin.ai.
