A major development in Trump's Fed feud is set to happen next week in the Supreme Court

• Trump's term as Fed Chair expires in May 2026, but his Board of Governors term runs until 2028, allowing him to potentially remain as an obstacle to Trump's push for rate cuts
• If the Supreme Court rules in Trump's favor against Cook, it would 'significantly raise the probability' that Powell could also be removed, according to Bank of America economists
• Markets are pricing in no Fed action at the January meeting, with the next rate cut not expected until June 2026, as traders assess the implications of the political battle

Summary: Trump-Fed Conflict Escalates with Supreme Court Case

Key Development:

The Supreme Court will hear arguments on January 21 regarding President Donald Trump's attempt to remove Federal Reserve Governor Lisa Cook. This case could significantly impact the ongoing feud between Trump and Fed Chair Jerome Powell.

Background:

Trump accused Cook of mortgage fraud related to properties purchased under federally subsidized housing programs. While the removal attempt has been unsuccessful so far, a White House victory could establish precedent for removing Powell, who is currently under Justice Department investigation for allegedly lying to Congress about a multimillion-dollar Fed headquarters renovation project.

Critical Timeline:

Powell's term as Fed Chair expires in May 2026, but his Board of Governors seat extends through 2028. This means he could remain on the board even after losing the chairmanship, potentially serving as a "bulwark" against Trump's efforts to influence Fed policy—specifically his demand for "MEANINGFUL" rate cuts.

Market Implications:

• Traders expect no Fed action at the upcoming January meeting
• Next rate cut anticipated in June, according to CME Group data
• Market volatility showing negative direction across dollars, stocks, and bonds
• Bank of America economist notes the Cook case is "more important for the policy trajectory than the identity of the next Fed Chair"

Historical Context:

Analysts compare the situation to 1948, when President Truman removed Fed Chair Marriner Eccles, who stayed on as governor until 1951 to defend central bank independence. Powell may follow similar precedent.

Bottom Line:

The Supreme Court decision will determine presidential authority over Fed governance, with profound implications for central bank independence and monetary policy.