Bank of America: "Probe into Powell could delay U.S. rate cuts"

With reports that the U.S. Department of Justice is investigating Federal Reserve Chair Jerome Powell, analysts say uncertainty could increase over the future path of benchmark rate cuts.

According to Walter Bloomberg, an overseas financial news alert channel, on the 13th, Bank of America (BofA) said in a recent report that "the investigation into Chair Powell could weigh on expectations for monetary policy easing." BofA added, "Market reaction has so far been relatively calm, but the issue could strengthen the position of hawkish policymakers within the Fed."

BofA said that "legal uncertainty surrounding Chair Powell could make the monetary policy environment more conservative," and that "deciding on rate cuts could become more difficult than before." In particular, it noted that if political and institutional pressure intensifies, the Fed could become more cautious about easing policy.

However, BofA pointed to a case involving Fed Governor Lisa Cook that the U.S. Supreme Court is set to hear as a more important variable than the selection of the next Fed chair. It judged that the ruling could have a more direct impact on the Fed’s independence and the structure of future policy decision-making.

Markets are watching closely how the probe into Chair Powell and legal issues within the Fed could affect not only the near-term rate outlook but also the broader stance of monetary policy going forward.