Marketplace Morning Report The politicization of monetary policy
Jan 12, 2026
Julia Coronado, an economist and the founder of Macro Policy Perspectives, dives into the escalating tension between political influence and the Federal Reserve's independence. She discusses the Department of Justice's unprecedented investigation into the Fed, highlighting its potential repercussions for financial markets. Coronado also examines how political pressures could impede evidence-based monetary policy decisions and the broader implications for inflation control and market volatility.
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Investigation Threatens Fed Independence
- The DOJ opened a criminal probe into Fed Chair Jerome Powell, which Powell called unprecedented and politically motivated.
- Julia Coronado warns this threatens the Fed's ability to set interest rates based on data rather than political pressure.
Politics Linked To Rate-Setting Frustration
- Coronado links the probe and prior attempts to remove Fed officials to the president's desire for lower interest rates.
- She says the Fed resisted big rate cuts because inflation remains high, fueling presidential frustration.
Market Volatility Hinges On Next Moves
- Markets reacted quickly: stocks fell and Treasury yields rose slightly after the news.
- Coronado cautions future market volatility depends on whether a line is drawn protecting Fed independence.