Jeanine Pirro drops criminal probe of Jerome Powell

The immediate market implication is not about Powell personally; it is about the removal of a governance overhang that had begun to price a higher probability of an institutional clash at the Fed. That matters most through rates volatility: when central-bank leadership is in dispute, the term premium tends to widen even without a formal policy shift, because investors demand compensation for policy error and legal friction. The near-term relief should therefore show up less in equities than in front-end rate vol, with the biggest beneficiaries being duration-sensitive assets that were discounting a less independent Fed.

The second-order winner is Warsh’s confirmation path, which likely reduces the odds of a messy interim arrangement or an open-ended leadership vacuum. But the deeper risk is that this is not a true de-escalation; it is a tactical swap from criminal exposure to inspector-general review, which preserves leverage for future political pressure. That means the market may be underpricing the chance that the next confrontation shifts from Powell’s personal conduct to the Fed’s balance sheet, capital spending, or communications — all of which can be used to question institutional competence without formally challenging independence.

For rates, the base case is a modest bull steepening reversal if traders had been fading the long end on Fed politicization fears; the more interesting trade is in volatility compression rather than outright direction. If Warsh is confirmed, his perceived willingness to favor easier policy may steepen the curve initially, but any aggressive repricing of cuts risks a later back-up in breakevens and term premium if inflation expectations re-anchor. The contrarian angle is that a more political Fed can be bullish for nominal growth assets for a few weeks, but bearish for equities on a 3-6 month horizon if it raises the cost of capital uncertainty and undermines USD credibility.