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Key Takeaways
- A DOJ investigation involving Fed Chair Jerome Powell hasn’t changed expectations for the Fed’s next interest rate decision.
- Markets still put the odds of a rate cut at about 5% for the Fed’s Jan. 28 announcement, essentially unchanged since the news broke.
- Rate decisions are made by a committee following a set process, and there’s no sign that the probe will alter that path.
What’s Happening With the DOJ Probe—And Why It’s Catching Attention
The Justice Department (DOJ) has opened a criminal probe involving Federal Reserve Chair Jerome Powell, an unusual development arriving just weeks before the Fed’s next interest rate decision. If you’re seeing those headlines and wondering whether they could affect what the Fed does next, it’s a fair question.
Fed rate decisions shape everyday finances, influencing both the return savers earn on cash in the bank and the costs borrowers pay on variable-rate debt such as a credit card balance. Whether this latest news has any bearing on interest rates depends largely on how the Fed’s decision-making process works—and whether there’s any reason to expect that process to change.
Why This Matters
Big headlines involving the Fed can make it seem like interest rates are suddenly up in the air. In reality, this development hasn’t changed expectations for the Fed’s next move or affected how decisions are made.
Markets Still See Little Chance of a January Rate Cut
Despite the DOJ news, market expectations for the Fed’s next move have remained largely unchanged. Investors are still pricing in little chance that the Fed will cut interest rates at its upcoming meeting, with the central bank set to announce its decision on Jan. 28. Futures pricing currently puts the probability of a January rate cut at only 5%, roughly where it stood before the DOJ probe became public.
Expectations climb for rate cuts at later Fed meetings, as shown in the chart below. But current market pricing suggests that it may take until the June meeting for the Fed’s benchmark rate to be lowered by at least a quarter point.
Why the Fed’s Decision-Making Process Hasn’t Changed
One reason expectations haven’t shifted is that a criminal probe is not the same as an arrest or formal charge, and it does not automatically disrupt the Fed’s operations. Powell is still expected to preside over the upcoming meeting, and the central bank’s schedule and procedures remain intact.
More broadly, interest rate decisions are made by the full Federal Open Market Committee (FOMC), not the chair alone. Policymakers base those decisions on the latest economic data, such as inflation and employment, and there’s no indication that a separate legal matter would change how committee members view the appropriate path for rates.
