The Fed Fights Back

When your central bank chair starts releasing evening video addresses, you know things have gotten serious. Economist Justin Wolfers isn't mincing words about what's happening between the Federal Reserve and the White House: this is war.

In a series of sharp statements on Monday, Wolfers characterized Fed Chair Jerome Powell's recent public messaging as something entirely new in central banking—a direct counter-offensive against political pressure. The weapon of choice? An evening video that Wolfers says represents an unprecedented move.

"Don't doubt that Jay Powell is going to war," Wolfers stated. "I've never seen a central bank release an evening video so directly taking on a head of state. In this case, the medium is the message: Powell is taking his case to the people."

It's a fascinating tactical shift. Central bankers typically prefer the language of careful monetary policy statements and academic prose. When they start going direct to the public with video addresses, something fundamental has changed.

Criminalizing Independence

Wolfers saved his harshest criticism for what he sees as an attempt to weaponize the Justice Department against Powell. He's rebranded it the "Department of Recriminations" and warned that caving to this pressure would transform the Federal Reserve into the "Federal Subserve."

"Attempting to criminalize the actions of an independent public servant… for the sin of acting independently… is an outrage," Wolfers wrote.

The economist laid out exactly what's at stake here, ticking through the damage: "It's bad economics, bad politics, bad for the rule of law, bad for the public sector, bad for American credibility and bad for Americans."

That's a lot of "bads." Wolfers is arguing this isn't just about monetary policy disagreements or typical Washington turf battles. It's about whether threatening criminal action against officials for doing their jobs independently becomes an acceptable political tool.

Where's Congress?

Wolfers isn't just sounding the alarm. He's calling for backup, specifically from Capitol Hill. He framed the conflict as a constitutional question about who actually controls monetary policy.

The answer, according to Wolfers, is clear: Congress holds that authority, not the President. And Congress needs to act to protect it.

"Congress didn't give Trump the power to run monetary policy," Wolfers concluded, "and it's up to Congress to ensure that he doesn't just steal it."

Meanwhile, On Rate Expectations

While this institutional battle plays out, markets are placing their bets on what the Fed will actually do next. According to the CME Group's FedWatch tool, traders are pricing in a 95% likelihood that the Federal Reserve will hold interest rates steady in January.

On Friday, the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust ETF (QQQ), which track the S&P 500 and Nasdaq 100 indices respectively, both closed higher. SPY gained 0.66% to reach $694.07, while QQQ advanced 1.00% to $626.70.

Futures for the S&P 500, Nasdaq 100, and Dow Jones indices were trading lower on Monday.