Beige Book: Trump Has Authority to Influence Fed Decisions, Raising Independence Concerns (Jan 4, 2026)

U.S. Treasury Secretary Janet L. Yellen testified Wednesday, Jan 4, 2026, that President Trump, and indeed any president, has the constitutional right to orally and politically influence Federal Reserve decisions, reigniting debates over the central bank’s independence. Yellen addressed the House Financial Services Committee, noting disagreement over whether the Unitary Executive Theory applies to the Fed. She stressed confidence in the Fed’s policy independence but argued it must rest on public trust and appropriate accountability. The Fed issued no immediate comment. Over the past year, Trump has pressured the Fed to lower interest rates and sought to remove Chair Lisa Cook over mortgage fraud allegations, which she denied. A Department of Justice probe is examining Chairman Jerome Powell following his testimony on the Fed’s headquarters renovation, with Powell citing political pressure as a factor that can削弱independence. Economists warned that削弱the Fed’s independence could erode confidence in U.S. markets and the broader financial system. Yellen said the outcome of the pending Supreme Court decision on the Cook removal case would resolve key legal disputes. Yellen also criticized inflation-driven loss of public trust in the Fed and the renovation’s cost overruns. Powell had defended the $250 million renovation, noting the need for structural repairs in a century-old building and independent oversight. Meanwhile, Yellen reaffirmed support for a strong dollar, contrasting with Trump’s preference for a weaker dollar to boost exports. On Wednesday, the dollar held steady after a strong rebound from a four-year low. Major U.S. indices closed lower: the S&P 500 fell about 0.5%, and the Nasdaq Composite declined over 1.5%.