Independence Without Evidence: The Fed’s Jan 11 Release Defends Process, Cites No Data

PRESS RELEASE SUMMARY

On 2026-01-11, the Federal Reserve issued a statement defending institutional independence and insisting interest rates are set on the basis of “evidence and economic conditions.” The striking part isn’t what the statement says—it’s what it omits: there are no economic metrics, no references, and no supporting data in the release. It also attributes Department of Justice actions to “the preferences of the President,” calling alternative explanations “pretexts,” a politically charged claim with no evidentiary detail.

Here’s what the release says—and what it doesn’t:
- It affirms that the Fed sets rates to serve the public, based on evidence, yet provides zero inflation, employment, or growth figures to substantiate that claim.
- It characterizes DOJ activity as driven by presidential preferences—an unusually political assertion in a Fed communication—again without specifics.
- By contrast, the 2025-12-10 FOMC cut rates by 25 bp to 3-1/2 to 3-3/4 percent, explicitly citing “moderate” activity, slower job gains, a higher unemployment rate through September, and inflation that had moved up and remained somewhat elevated, with rising downside risks to employment.
- The trend in recent communications has shifted: from data-grounded policy (Dec 10) and detailed inflation mechanics (Dec 15) to a governance defense (Jan 11) without the data the Fed says guides its decisions.
- There are no contradictions with CPI/PPI/PCE or labor data in the Jan 11 release—because it makes no economic claims to contradict. The issue is omission, not inconsistency.

Numbers Behind the Narrative Drift

The Fed’s December communications were quintessentially technocratic. The Dec 10 FOMC statement laid out a careful macro read, cutting rates 25 bp to 3.50–3.75% on the back of slower job gains, a higher unemployment rate through September, and inflation that had moved up and remained somewhat elevated, with downside risks to employment rising. On Dec 15, Governor Miran dissected price dynamics, emphasizing shelter measurement lags in PCE—precisely the kind of analytical scaffolding that shores up credibility.

Then came Jan 11: Chair Powell’s statement focused on institutional independence amid DOJ subpoenas, describing motivations as political “preferences,” calling alternative explanations “pretexts,” and asserting evidence-based decision-making—without presenting any.

Here’s a side-by-side snapshot:

The pattern is unmistakable: a pivot from data-centric messaging to institutional defense. That’s not a policy change, but it is a communications change—and markets price both.

Independence vs. Evidence: The Messaging Gap

The Fed’s institutional independence is not in question here; what’s at issue is communications hygiene. When the chair asserts that policy is driven by “evidence and economic conditions” but offers no supporting figures, the gap between principle and presentation widens. In December, the central bank cut 25 bp and justified it with a tangible macro read. In January, the bank vouches for its process while declining to show its work.

This matters for two reasons:
- Credibility premium: Central bank communications are a risk asset in their own right. When statements are data-light, the market’s inferred error bands around the reaction function widen. That can elevate the term premium even absent a change in the expected path of policy rates.
- Narrative dominance: In the absence of numbers, the politically inflected language (“preferences of the President,” “pretexts”) becomes the headline. That pulls the discourse away from the Fed’s comparative advantage—measurement and modeling—and toward politics, which the Fed typically avoids for good reason.

To be clear, Jan 11 doesn’t contradict December’s data-based decisions; it simply doesn’t engage with them. And that silence is the point.

Politics Creep and Market Risk

The release’s characterization of DOJ actions as a function of presidential preferences is unusual for a Fed communication. Even if correct, absent specifics it invites a market response that’s more about institutional friction than inflation or employment.

Potential market channels:
- Rates volatility: Communications uncertainty tends to lift implieds at the front end. Options on SOFR and Treasury futures typically pick this up first.
- Term premium: A higher risk premium for policy uncertainty can put a floor under the back end of the curve even if the modal rate path still trends lower with disinflation progress.
- Dollar and credit: If the market reads “politics” risk into monetary policy, the dollar can catch a safety bid on U.S. institutional strength—or weaken if investors price coordination risks. Investment-grade credit usually weathers communications noise; high yield is more sensitive if policy uncertainty bleeds into growth-risk pricing.

The cross-check with December is instructive: on Dec 10, the Fed moved rates with a clear macro rationale. On Jan 11, it defended its independence without new economic content. That juxtaposition doesn’t change the modal path; it widens the tails.

The Data That Should Have Been There

If the purpose is to reaffirm evidence-based policy, the evidence can be summarized in three lines—without prejudging upcoming prints:
- Activity: December language said growth was “moderate” and job gains had slowed, with the unemployment rate edging up through September.
- Inflation: The FOMC stated inflation had “moved up since earlier in the year and remains somewhat elevated,” while Miran highlighted measurement lags in shelter that affect PCE readings.
- Risks: The balance of risks shifted, with “downside risks to employment” rising—consistent with the 25 bp cut to 3.50–3.75%.

Including even these already-public reference points would have tightened the Jan 11 narrative to the December foundation and likely reduced market ambiguity at no cost to the Fed’s legal posture.

What This Means for Markets

• Rates path: The Dec 10 cut and rationale remain the anchor. The Jan 11 release doesn’t alter expected easing over 2026, but it introduces communications risk that can keep front-end volatility elevated.

• Term structure: Expect episodes where long-end yields decouple from immediate macro news if term premium rebuilds on institutional headlines. Curve steepening on risk-off days becomes more probable.

• Equities: Policy-sensitive sectors (housing, small-cap cyclicals) still lean on the December easing narrative. However, higher rate vol can compress multiples at the margin, especially for long-duration growth names.

• Credit: IG should remain resilient if December’s “moderate” activity persists; HY spreads are more vulnerable if communications uncertainty morphs into growth worries.

• Dollar: Direction hinges on whether investors read the episode as institutional resilience (USD positive) or politicization risk (USD negative). Expect choppier price action around policy headlines.

The Investor Takeaway

Position for communication-induced volatility without abandoning the December macro anchor:
- Rates: Consider owning modest front-end optionality (SOFR or 2-year futures options) to hedge headline risk while maintaining core duration exposure aligned with a gradual easing path. Barbell duration can balance carry with convexity.
- Curve: Maintain a tactical steepening bias—term premium can reprice faster than the policy path changes when communications uncertainty rises.
- Equities: Favor quality balance sheets and cash-generative names over long-duration multiple stories until rate vol settles. Housing and selected financials still benefit from lower policy rates, but expect choppy beta.
- Credit: Stay up in quality; use any spread widening tied to headlines (not fundamentals) to leg into IG primary. Keep HY exposure selective and short-duration.
- FX: Keep position sizing disciplined; headline risk argues for tighter stops and optionality over outright directional bets.

The Fed can defend its independence or demonstrate it. The 2026-01-11 release chose defense without data. Investors should price the message, but trade the evidence—the numbers last cited on 2025-12-10 still do the heavy lifting, even if the latest statement didn’t repeat them.