U.S. Federal Reserve Chair Jerome Powell conducted a press conference on December 10, 2025, following a two-day meeting of the Federal Open Market Committee in Washington.
The Federal Reserve embarks on 2026 facing numerous political and policy challenges, emphasized by the appointment of a new chair and an economy experiencing both positive and negative forces, which underscore the critical nature of policymakers' decisions.
After three consecutive interest rate cuts, the central bank is anticipated to follow a more cautious trajectory in the coming year. Additional cuts may be unlikely given the expectations of robust economic growth and ongoing inflationary pressures.
It seems evident that after a year marked by significant upheaval at the Fed, 2026 promises to offer similar challenges. "I do think there'll be a big spotlight. There'll be lots of intrigue," said Kathy Bostjancic, chief economist at Nationwide. "There's still a lot of uncertainty that keeps the Fed in the spotlight, and probably in the hot seat too."
In the previous year, the Fed was subject to unprecedented scrutiny. As he began his second term, President Donald Trump repeatedly threatened to dismiss Fed Chair Jerome Powell for not aggressively pursuing interest rate cuts. Mid-year, the Fed faced criticism again due to cost overruns during a renovation at its Washington headquarters.
Furthermore, Trump attempted to remove Governor Lisa Cook amid unsubstantiated allegations of mortgage fraud, which have not been formally charged. This took place amidst ongoing speculation regarding Powell's successor, with up to 11 candidates considered in a selection process led by Treasury Secretary Scott Bessent.
As 2026 begins, a Supreme Court hearing is scheduled on January 21 to determine if Trump has the power to remove Cook. The Federal Open Market Committee is set to hold its interest rate vote a week later. During the same period, Trump is expected to announce his choice for Fed chair, and Powell, who has been reticent on the issue, must decide whether he will remain a governor until January 2028.
Moreover, recent rate decisions have seen several dissents, and the entry of new regional presidents with a hawkish stance to the FOMC suggests resistance to further cuts.
"It's still a tough spot for the Fed," noted Bostjancic.