“It’s a little hard to know what exactly the motivations are behind this, but my expectation is that it’s not going to have an impact on policy,” Goldman Sachs chief economist Jan Hatzius said in an interview with CNBC’s “Squawk Box Europe” on Monday. “My expectation is that decisions are going to be made based on employment and inflation.”

Goldman Sachs has pushed back its forecast for the Fed to lower rates in March and June 2026, and now expects two 25-basis-point cuts in June and September of this year.

On Sunday night, Powell confirmed in a statement he was under investigation by the DOJ related to a testimony he gave over the renovation of Fed buildings. The probe on Powell, whose term as chair is up in May, has stoked fears of an attack on Fed independence. 

For months, Trump, who appointed Powell in his first term, has built up a case to remove the Fed chair from his position. In July, the president said he was “surprised” Powell was appointed chair. Trump accused Powell of mismanaging funds to renovate the Fed buildings, which cost roughly $700 million more than the $2.5 billion initially allocated for. Last month, Trump threatened to sue Powell for “gross incompetence,” but did not cite specific claims. 

According to Powell, the investigation has little to do with the Fed building, but is rather a pretext to assert influence on monetary policy.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said in the statement. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”

Trump told NBC News he had no knowledge of the DOJ’s case in advance, and denied the case was intended to pressure Powell into cutting interest rates.

“I wouldn’t even think of doing it that way,” Trump said. “What should pressure him is the fact that rates are far too high.”

Potential consequences of the probe on Powell

Officials and economists have warned Trump’s efforts to oust Powell may have unintended consequences. Brian Jacobsen, chief economist of Annex Wealth Management, said in a note to clients on Sunday that Powell may stage a “sit-in,” as his term on the board of governors isn’t up until 2028, making it harder for a Trump-appointed chair to gather momentum on cutting rates. This is unusual, as when prior Fed chairs resign, they typically leave the board as well.

“With the political pressure on the Fed, he may choose to stay on as a governor out of spite,” Jacobsen said. “It would deprive President Trump of the ability to stack the board with another appointee.”

Republican Sen. Thom Tillis, who sits on the Senate Banking Committee overseeing the Fed and is not seeking reelection, said he would oppose confirming any Fed position, including the chair, until the investigation and any legal matters are concluded.

Regardless of whether Powell has a strong Fed presence, Hatzius believes it will make little difference to the board of governors and 12 Fed presidents, who are likely to continue tackling the challenge of interpreting contradictory economic data showing a shaky labor market and inflation levels cooling to the Fed’s preferred 2%. Goldman predicts “sturdy” economic growth of 2.8% this year.

“My expectation is that the full committee and its 12 people having votes—19 people around the table—are going to make decisions on monetary policy that are based on the economic data,” Hatzius said.