President Trump’s threat to attempt to fire Federal Reserve Chair Jerome Powell has raised a pressing but potentially unanswerable question: What would the global economy and financial markets look like without an independent U.S. central bank? Former Fed officials and investors warn that a central bank more beholden to the White House could lose its ability to act quickly and credibly in the face of financial threats. But does Trump actually have the authority to fire Powell? Experts say the circumstances under which a president in fact can fire a Fed chair have never been crystal clear.

Shielded from White House interference, the independent Fed has increasingly served as an anchor for U.S. and global markets, stepping in to steady the ship during the 2008-09 financial crisis, the Covid pandemic and other shocks of recent years.

Economists credit the central bank’s ability to help keep things stable in large part to its power to make moves it deems necessary, regardless of politics.

The possibility that the firewall could crumble holds the potential to reverberate across markets at an unpredictable moment for the economy.

The U.S. is still shaking off years of inflation above the Fed’s longstanding 2% target, with recent data showing that price pressures from Trump’s trade wars are beginning to mount. Central bankers and investors the world over are waiting on the Fed’s next move.

Underneath the controversy lies a central question: Does Trump actually have the authority to fire Powell?

The circumstances under which a president in fact can fire a Fed chair have never been crystal clear, experts say.

• Warsh Says Fed Chair Will Stay Independent Under Trump

“I believe it makes sense to cut the [Fed’s] policy rate by 25 basis points two weeks from now,” Waller began his speech to the Money Marketeers of New York University. “The risks to the economy are weighted toward cutting sooner rather than later.” (Barron's)

• Coinbase Eyes Regulatory Win as Trump Pushes Crypto-Friendly Legislation

8:30 a.m.: New Residential Construction - Housing Starts and Building Permits
10 a.m.: University of Michigan Survey of Consumers - preliminary
10 a.m.: State Employment and Unemployment

10 a.m.: Leading Indicators

It turns out Andy Warhol is no match for Jay Powell.

Expensive paintings are proving to be more sensitive to interest-rate hikes than even sophisticated investors expected, writes Carol Ryan for The Wall Street Journal.

A bubble at the top of the art market has burst. Auction sales of paintings that cost more than $10 million fell 44% last year, and continue to be depressed in 2025, data from ArtTactic shows. The shift in the market was clear at Sotheby’s New York auction in May, when a sculpture by Alberto Giacometti with a $70 million asking price didn’t attract a single bid and had to be pulled from sale.

This is odd. In 1993 and again in 2010, Yale professor William Goetzmann analyzed more than two centuries of art-auction results, finding that painting prices are correlated with the stock market and act as a good inflation hedge.

So based on history, the high end of the art market should be doing OK with the S&P 500 bobbing around record highs, but the correlation appears to have frayed.

Inflation will trend higher in the U.S. if Fed chair Jerome Powell is ousted and replaced by a policymaker more amenable to interest-rate cuts, Commerzbank economist Joerg Kraemer warns. President Trump, an outspoken critic of Powell and an advocate of looser monetary policy, told some Republicans he has written a letter firing Powell and may send it, The Wall Street Journal reported this week. Whatever happens, it's clear that the Fed's independence will weaken over Trump's term, Kraemer says. Faster rate cuts risk driving long-term inflation higher, adding to the higher prices implied by Trump's tariffs, he says. "It would be surprising if the emerging politicization of the Fed did not cause long-term inflation expectations to rise," Kraemer says. — Joshua Kirby

The scope for a meaningful dollar recovery looks limited given the risk of the Federal Reserve's independence being damaged, MUFG Bank's Derek Halpenny says in a note. Recent data argue for the Fed to remain cautious over interest-rate cuts, he says. However, Fed policymaker Christopher Waller on Thursday reiterated that rates should be cut at the July 30 meeting. Fed official Michelle Bowman has also indicated her support for a reduction this month. Both were appointed by President Trump, who has repeatedly called for lower rates. Trump is set to appoint four new Fed members by mid-2026. "So this threat to the Fed independence will not go away," Halpenny says. — Renae Dyer

• China’s economy performed better than expected in the first half of the year, but analysts say maintaining that momentum will be a challenge in the months ahead.
• Local governments in China have tried mostly in vain to lift the country’s shrinking birthrate with perks, cash rewards and housing subsidies. Now, the central government is stepping in.
• A slight easing in Japan’s consumer inflation is welcome news for the central bank, but stubbornly high food prices will be of concern for policymakers whose hands remain tied by tariffs.
• Moody’s Ratings upgraded Argentina’s credit ratings and upped its outlook, citing stabilizing and disinflationary macroeconomic reforms.
• Last year’s record-high prices for cocoa have translated into lower demand for chocolate this year, making traders reluctant to buy futures and sending the contracts spiraling.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by news associate Roshan Fernandez in New York. Send your tips, suggestions and feedback to roshan.fernandez@wsj.com.