In the run-up to the election, Trump claimed Powell acted politically by lowering interest rates to help President Biden (an insult, given the legally mandated autonomy of the organization). Vice president JD Vance lobbied for more political control over the base interest rate.

While some economists later echoed Trump in saying the Federal Open Market Committee (FOMC) should cut rates, the public outpouring of Trump’s fury was extraordinary: Trump called him “Too Late Powell,” a “stubborn mule,” a “major loser,” and a “stupid person.” 

Wall Street grew uncomfortable with the attacks. Even if it wanted to see rate cuts, it didn’t want to see the central bank’s independence threatened. When Trump pulled back on the notion of firing Powell, he instead focused on other members of the FOMC. In September, he attempted to oust Fed Governor Lisa Cook via social media, alleging she made false statements on a mortgage application. She denies that and has taken her case to the Supreme Court. Hearings begin in January.

Other autonomous agencies got the message: If Trump is willing to take on the Fed, they might be next.

“How much can truly change under a single administration?” I asked one source. “Three years is a long time yet,” was the response. 

The January question

Since January, many federal employees inside and outside the Fed have quietly decided that discretion is the better part of valor. To the relief of Wall Street, the Fed’s most prominent figures haven’t gone to ground entirely.

Outside of monetary policy leaders have publicly stuck to the script when it comes to political questions. Time and again, Powell insisted that base rate decisions are made exclusively and entirely on data pertaining to the economy. On the elephant in the room that is January’s court hearings over the firing of Cook, Powell said it would be “inappropriate” to comment. 

While the temperature has dropped for now, sources say, they’re preparing for the mercury to start rising again early next year. The reasoning that an independent Fed leads to better economic outcomes is widely accepted. But if Trump succeeds in ousting Cook, then the Fed’s autonomy looks less secure—potentially leading to inflationary sentiment.

Analysts’ concerns over the Fed’s independence don’t descend as low as comparisons to President Nixon and Arthur Burns however, when an alignment on monetary policy between the White House and the Fed plunged the economy into a crisis.

Economists more widely believe that there are too many defenders of independence—and too much scrutiny from the markets—to allow politicians to attempt to fundamentally alter the trajectory of the Fed, especially if Jerome Powell sticks around as a governor.

Selective silence is a tactic on which it seems everyone, at last, can agree. Critics argue that the Federal Open Market Committee (FOMC)—with its mysterious dot-plots and the breadcrumbs its members occasionally drop into speeches—engages the attention of Wall Street a little too much. Treasury Secretary Scott Bessent has been lobbying for a “backseat” Federal Reserve, something insiders will be only too happy to oblige. 

On the other hand, the Federal Reserve system is mandated to answer to Congress and, by extension, the American public. In an era of economic volatility, with business leaders and consumers alike unsure of the path forward, a void of insight from key decision-makers could be damaging and frustrating. 

There’s also been a delicate balance to strike between pushing back on claims about bias within the Fed and reminding the public that the Fed is focused mainly on, and is guided by, its mandate. 

The next Fed chairman

Another awkward question is who’s actually in charge. Secretary Bessent has made it clear that in the search for a new Federal Reserve leader, he wants to appoint a “shadow chair”, someone to be the true power at the Fed while Powell is increasingly overlooked as he nears the end of his term in May.

It was not a popular idea, but the White House has proceeded with a very public recruitment process ever since. Potentially impacted parties are keeping an eye on frontrunners, they said, without becoming overly invested in outcomes that may never come to pass. 

One concern is that the broadcast nature of the selection process means pressure is already piling onto the shoulders of the would-be nominee, who must wrangle expectations without having accumulated much real influence within the central bank. 

Wall Street is also preparing for some early hiccups. Until the past few meetings, Powell’s run had been one of steady consensus. As UBS’s Paul Donovan said in a note to clients this week: “What is perhaps more interesting today is the extent of division within the Federal Reserve. This is potentially storing up trouble for Powell’s successor as Fed Chair. A Fed that is prepared to dissent under Powell may be more inclined to dissent under a Fed chair who commands less respect in the institution, and the wider financial markets.”

Whatever the creases that will need to be ironed out under a new Federal regime, Trump’s cabinet seems keen for it to happen behind closed doors. For federal staffers who want to crack on without the weight of the White House breathing down their necks, the diversion of that attention can’t come soon enough.

In a forecast published earlier this month, economists at the bank attributed 2025’s loss of jobs momentum to business uncertainty created by President Donald Trump’s tariffs and trade policies.

“As a result both long-term and short-term business planning has remained difficult, and layoff and hiring rates have been low,” Michael Feroli, chief U.S. economist at JPMorgan, said in the report. “Businesses are hesitant to make sweeping changes to either grow or shrink their payrolls when they’re unsure what the next six months might hold.”

In addition, Trump’s immigration crackdown and deportation campaign have been more aggressive than expected, JPMorgan added.

This reduced supply of workers plus the relatively flat labor participation rate flat mean that the monthly job gains needed to keep unemployment steady could tumble to just 15,000 from 50,000. Despite the lower breakeven rate, unemployment will creep higher.

“The first half of 2026 will likely deliver uncomfortably slow growth in the labor market, with unemployment peaking at 4.5% in early 2026,” JPMorgan said, a week before the Labor Department released the delayed November jobs report that showed the rate climbing to a four-year high of 4.6%.

The bank blamed sluggish growth due to the labor supply shrinking from deportations, an aging population and fewer visas for workers and students.

Another factor in the early-2026 slump is artificial intelligence, which has spurred massive investment in equipment, software and data centers—but not so much job creation.

While there are still no signs yet of widespread job losses because of AI, some of the sectors most exposed to the technology have seen slower gains, JPMorgan pointed out.

But then the labor market will reverse course in the second half of the year, economists predicted, citing a more consistent tariff policy, tax cuts from Trump’s One Big Beautiful Bill Act, and additional rate cuts from the Federal Reserve.

“We believe supports are coming together that will arrest this labor market slowdown and revive activity growth later next year,” Feroli said. 

JPMorgan sees GDP growth in 2026 at 1.8%, with one-in-three odds of a recession, and inflation remaining sticky at 2.7%. 

Separately, Bank of America CEO Brian Moynihan expects Trump to de-escalate trade tensions next year, telling CBS News’ Face the Nation that an average tariff rate of 15% for a broad group of counties is “not a huge impact.”

Meanwhile, AI could be a wildcard that provides yet another boost next year.

“Usually, it takes several years for general purpose technologies like AI to boost productivity,” Feroli added. “A quicker realization of efficiency gains could lead to stronger GDP growth than expected.”

But that optimism contrasts with continued warnings from computer scientist and “godfather of AI” Geoffrey Hinton, who has said AI will replace more and more human workers.

During an interview on CNN’s State of the Union on Sunday, he was asked for his 2026 predictions after declaring 2025 a pivotal year for AI.

“I think we’re going to see AI get even better,” Hinton replied. “It’s already extremely good. We’re going to see it having the capabilities to replace many, many jobs. It’s already able to replace jobs in call centers, but it’s going to be able to replace many other jobs.”

North Korea said it conducted a long-range strategic cruise missile launch drill over the West Sea on Sunday as it continues to showcase its weapons capabilities amid regional tensions.