Battle for the Fed shapes this week's rate outlook

The Federal Reserve is under political pressure, but markets and policymakers expect a pause at this week's FOMC meeting; the Supreme Court recently warned that moves to remove a governor could weaken Fed independence.

The Federal Reserve is facing renewed political scrutiny as debate over its independence has intensified. Outgoing Chair Jerome Powell has pushed back after threats of a criminal case linked to Fed building renovations, and he has emphasized the importance of institutional independence. Policymakers and markets are watching this week's Federal Open Market Committee meeting for signals on the policy path, with little market expectation of an immediate return to easier policy. Key points: - Jerome Powell said recent pressure on the Fed amounted to a pretext aimed at forcing deeper rate cuts, after threats tied to renovation matters. - The FOMC meets Wednesday and, following three cuts late last year, a further pause is widely expected given current growth, inflation and employment readings. - Supreme Court hearings last week included warnings from justices that removing a governor while legal matters proceed could weaken the Fed's independence. - Financial markets have reduced bets on near-term easing, with futures not fully pricing another cut until later in the year. Summary: Political pressure has increased scrutiny on the Fed, but economic indicators and judicial signals have so far supported a cautious approach by policymakers. The immediate next procedural step is the FOMC meeting on Wednesday; further changes would hinge on material shifts in economic data or legal outcomes.