Federal Reserve Chair Jerome Powell will take the unusual step of attending Supreme Court oral arguments Monday in a case that could reshape the central bank's independence from presidential control, according to AP sources.
Powell's presence at arguments in the Cook case - involving whether Fed governors can be removed by the president - signals how high the stakes are. This isn't arcane administrative law. This is the foundation of central bank credibility.
The case centers on Fed Governor Lisa Cook and whether the president has authority to remove Fed officials before their terms expire. The current framework provides "for cause" protection, meaning governors can only be removed for specific reasons, not policy disagreements.
Strip that protection away, and you fundamentally change what the Fed is. Markets don't trust central banks that take orders from politicians. Bond yields would spike. Inflation expectations would become unanchored. The dollar's reserve currency status would face new questions.
Here's what Wall Street is watching: If the Court rules that Fed governors serve at the president's pleasure, Trump gains leverage to pressure Powell on rate decisions. Trump has already made clear he wants lower rates regardless of inflation data.
The irony is rich. Trump appointed Powell in 2017, then spent years attacking him for not cutting rates fast enough. Now Trump may get legal authority to remove Fed chairs who don't comply with presidential wishes.
Bond traders are already gaming out scenarios. A ruling that weakens Fed independence would likely trigger a dollar selloff and Treasury yield spike as investors demand higher risk premiums. You don't mess with central bank independence without paying a price.
Powell showing up personally demonstrates he understands the stakes. Fed chairs typically maintain distance from political processes. His attendance is itself a signal - this matters more than almost any monetary policy decision.
The numbers don't lie, but executives sometimes do. If this Court guts Fed independence, watch what central bankers do, not what they say in prepared remarks.
