If you care about your money, close your eyes and say a prayer of thanks to John Roberts and Brett Kavanaugh
The Fed's independence survived by one vote.
If you care about your money, close your eyes and say a prayer of thanks.
Even as the Republican-controlled Supreme Court ruled to sweep away checks and balances throughout the federal government, two members of the ruling majority sided with the court's non-Republicans to save the independence of the Federal Reserve.
If either Chief Justice John Roberts or Justice Brett Kavanaugh had voted the other way in Monday's 5-4 ruling on the firing of Fed governor Lisa Cook, mortgages and interest rates would be heading up, your 401(k) would be heading down, and the prices you pay for everything from eggs to haircuts to pickup trucks would be rising.
How many Americans realize how close we just came to financial chaos? Not many, I bet. Maybe that's a good thing.
The court now consists of six Republicans and three "liberals," or non-Republicans.
All six Republicans ruled that President Donald Trump could fire pretty much whomever he liked throughout the federal government for whatever reason he wanted, up to and including members of the nominally independent Federal Trade Commission.
(Would these six have reached the same ruling if it were a Democratic president firing independents and conservatives? You make the call. In the cases of Justices Clarence Thomas and Samuel Alito the question isn't even interesting.)
But what matters for us here is that, praise be, two of the Republicans broke with their fellow party members to make an exception for the Fed.
They offered a variety of legal excuses. But you don't have to be a cynic to wonder if they made this single exception mainly because the Fed matters so much to their own personal wealth, to that of their friends and to that of the political class.
As more than one person has said, there is really only one party in America: The "green" party.
The nominal subject of the ruling was Trump's attempt to fire Cook from the Fed.
Roberts and Kavanaugh agreed with the court's non-Republicans that the Federal Reserve was designed both to be independent of the government, and to be seen as independent.
While Fed governors can be fired by the president for "cause," they agreed, that is not the same as fired "at will." There has to be a real reason, it has to be subject to some sort of judicial review, and the accused has to be given some opportunity at least to respond to the charges.
Republicans Thomas, Alito, Neil Gorsuch and Amy Barrett, none of whom should ever again be called "conservative," disagreed with even that low bar.
The details of the alleged "case" against Cook are almost irrelevant. What matters is the Supreme Court has just, if only just, upheld the independence of the Fed.
It's bad news for investors if any president, Democratic or Republican, has control over interest rates. If the Fed were under presidential control, long-term interest rates would rise, mortgage rates would rise, inflation would rise and the market would fall.
Actually, that's pretty much what happened during the early and mid-1970s, when Fed Chair Arthur Burns allowed himself to be dominated by President Richard Nixon.
It's what has happened in most other countries when the central bank is under political control. The United Kingdom had terrible problems with inflation, interest rates and boom-and-bust cycles for decades until Gordon Brown, the new chancellor of the exchequer, made the central bank independent in 1997.
This is where we remind you that Trump has been demanding the Fed slash interest rates for over a year, inflation be damned.
"We should be paying 1% interest or better," the president wrote on Truth Social, the platform he uses for presidential announcements and operates for profit, on June 30, 2025, one year ago Tuesday. At the time, the federal funds rate was 4.25% to 4.5%, so the president was calling for the Fed to slash interest rates by more than three-quarters.
Just a few weeks earlier he had called on the Fed to cut rates by two full points, or by more than half.
Shortly before that he'd called for the Fed to cut rates by one point.
And before that he'd publicly demanded the Fed slash rates on multiple other occasions, from January to May.
For good measure, Vice President JD Vance called it "monetary malpractice" that the Fed hadn't cut rates.
It was a few weeks later that the president tried to seize control of the Fed by firing Cook.
Today, consumer prices - as measured by the consumer-price index - are rising by 0.47% a month. That's an annualized inflation rate of 5.8%. And even before the war with Iran, prices were rising by 0.27% a month, or an annualized rate of 3.3% - well above the Federal Reserve's official 2% target.
And that's with short-term rates held at 4.25% to 4.5% until last September, and then cut only slowly, with three quarter-point reductions since.
Imagine where inflation would be if the Fed were under presidential control and short-term rates had been dutifully slashed, to 1% or even lower, a year ago. Imagine where your 401(k) would be. Imagine where long-term interest rates would be.
Among the many problems today is that there seems to be widespread confusion, from the media to the Oval Office, about the definition of "interest rates." This is adding to our woes. The Fed sets the overnight, or short-term, interest rate. But more important for much of the economy are longer-term interest rates. The Fed does not usually set those, at least not directly. Longer-term rates are set by the bond market, based - among other things - on the signals the bond market gets from the Fed about how vigilant it is going to be about inflation.
If the bond market fears the Fed is going to be lax about inflation, letting consumer prices rise, the bond market will demand a higher rate of interest on any money it lends long term to the government (or anyone else). As a result, a lax Fed will lead to higher, not lower, long-term rates.
We escaped this disastrous outcome by one Supreme Court vote. Let us at least give thanks for small mercies.
-Brett Arends
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 30, 2026 08:40 ET (12:40 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments