The Ten: Powell and the Fed under fire — and in the spotlight 

Editor's note: In a year of epic mergers — and industry division — a handful of people and themes have emerged as defining forces. Real Estate News has selected the top newsmakers of 2025, based on their industry impact and influence. They are The Ten.

The Federal Reserve doesn't typically garner much attention from everyday consumers, but this year it was thrust into the spotlight.

The administration publicly pressured the agency to lower short-term interest rates, and President Donald Trump called for the resignation or removal of some Fed officials (including its leader) in an apparent effort to align the Board of Governors with his agenda.

Many analysts saw these developments as a threat to the Fed's independence. If the central bank became a political body, they warned, investors could lose confidence in its monetary policy decisions — and in the U.S. economy at large.

Amid these pressures, Fed Chair Jerome Powell remained steadfast, ignoring directives from the White House and insisting that the Fed would continue to make data-driven decisions.

Inflation, employment numbers drove monetary policy

In 2025, two key areas of focus for the Federal Open Market Committee (FOMC) were sticky inflation and a softening labor market.

Pointing to a strong economy and concerns about elevated inflation, the Fed held off on cutting short-term interest rates at its first meeting of the year. Meanwhile, the 30-year fixed-rate mortgage topped 7% in January — the third consecutive year of an early rate spike — and held above 6.6% until August.

While inflation worries persisted after the Trump administration announced sweeping "Liberation Day" tariffs in April, the Fed's focus shifted over the summer to the weakening labor market. In September, the Fed made its first rate cut of 2025, followed by two additional 25-basis-point cuts in October and December — despite losing access to key economic data during the federal government shutdown.

Mortgage rates initially increased after each cut but ultimately trended downward, settling around 6.2% toward the end of 2025. Rates were also helped by Fannie Mae and Freddie Mac adding billions of dollars of mortgage-backed securities and home loans to their balance sheets, according to Bloomberg.

While the drop in rates helped improve affordability, it wasn't enough to offset the pandemic-era run-up in home prices. Economists have predicted that affordability will remain a challenge for consumers in 2026.

Outside pressures fuel debate about Fed's independence

As the Fed attempted to bolster the struggling labor market without ratcheting up inflation, some of its members made the headlines — largely due to the attention they received from Trump and FHFA Director Bill Pulte, who commented on Fed meetings throughout the year, reacting to monetary policy decisions and demanding rate cuts.

While mortgage rates are "not as strongly tied to the Federal funds rate" as shorter-term loans — they're more heavily influenced by factors like inflation and investor sentiment, according to Bright MLS Chief Economist Lisa Sturtevant — Trump and Pulte's consistent demands on the Fed may have raised consumer expectations that mortgage rates would fall if short-term interest rates dropped.

The pressure campaign intensified as Trump urged Powell to resign — an unusual move, since the Fed is supposed to be immune from political influence — and drafted a termination letter, which Trump reportedly showed congressional legislators but did not send.

In August, Trump's focus shifted to Fed Governor Lisa Cook, a Biden-appointee who became a target as Pulte accused her of mortgage fraud, referring the matter to the DOJ for investigation. Trump attempted to fire Cook over the fraud allegations — marking the first time a president has tried to remove a standing Fed governor — a move that drew ire from legal experts who questioned its legality and the broader implications for the central bank's independence.

Why Fed independence matters

The perception of independence at the Fed, particularly for stock market investors, is a big deal for real estate and the stability of the U.S. economy. 

If investors suspect that the Fed would lower rates to please the president — regardless of what the economic data signals — they may be less likely to buy bonds out of fear that inflation could come roaring back.

In the wake of Cook's attempted termination, several ex-Fed chairs and former economic advisers voiced their concerns, filing a legal brief with the Supreme Court emphasizing the importance of Fed independence.

Allowing Cook's immediate removal would have exposed the central bank "to political influences, thereby eroding public confidence in the Fed's independence and jeopardizing the credibility and efficacy of U.S. monetary policy," they wrote.

Powell stays the course

Despite the onslaught of criticism from the administration, Powell has largely stayed out of the political fray. Aside from voicing concerns about the potential inflationary impacts of Trump's tariffs, the Fed chair has avoided making public comments outside of scheduled speeches and press conferences. When asked in May if pressure from the president impacted the Fed's activity, Powell's response was blunt: "It doesn't affect doing our job at all."

Not only has Powell kept his post, he's been a consistent voice of Fed independence, even when the central bank's decisions were at odds with the president's wishes. Powell repeatedly explained that while the Fed was open to rate cuts, the FOMC wouldn't make that decision until the economic data called for it.

But not all Fed officials have been aligned. Signs of internal dissent began to appear as voting members — bucking historical norms — argued for and against cutting rates in national media appearances. And at its final meeting of 2025, the Fed's vote to cut rates was 9-3, marking the first time in six years that three officials dissented.

What happens next?

With Cook's future at the Fed still uncertain and Powell's term as chair slated to end in May, the central bank could look very different a year from now.

On the monetary policy front, the Fed indicated at its December meeting that it'll take a wait-and-see approach heading into 2026, though the next chair could advocate for a different strategy.

As things stand, mortgage rates are "expected to hover near current levels," according to Realtor.com Senior Economist Jake Krimmel, which will keep affordability concerns "front and center" for consumers.

As for the future of the Fed itself? The Fed's governing board recently reappointed 11 of its 12 regional presidents — a move that will retain some stability in the year ahead.

But a competitive race to replace Powell is ongoing, and the central bank's independence has been a key topic among the top candidates — some of whom have close ties to the president.

The next leader, however, may end up being "the least important" chair in decades, suggested Jason Furman, a former White House economic adviser, because finding a consensus among voting members will be difficult given the climate of dissent.