The Supreme Court will hear arguments Wednesday over whether President Trump can fire Federal Reserve governor Lisa Cook—a case about far more than one official’s job. On the Fed's monetary stance, Fed Gov. Michelle Bowman said at a conference Friday that given fragility in the labor market, it is too soon for policymakers to signal that interest rates are on hold. Vice Chair Philip Jefferson said separately that the Fed's current policy stance on interest rates leaves it well positioned to determine the extent and timing of additional rate adjustments based on incoming data. On the trade front, President Trump threatened to impose tariffs on countries that oppose his efforts to take control of Greenland. This tariff threat isn’t like the others, writes Greg Ip for The Wall Street Journal. 

No president had attempted to remove a Federal Reserve governor in the central bank’s 112-year history until Trump tried to fire Lisa Cook last August over unproven mortgage-fraud allegations. The case will ultimately determine whether the legal protections Congress created 90 years ago to insulate the central bank from political pressure have any meaning or whether a president can remake the Fed’s board at will. Every living former Fed chair has urged the court to side with Cook.

In the past year, President Trump has used tariffs extensively to pursue trade and investment deals, or address domestic complaints like illegal immigration and drugs. His threat to hit several European countries with tariffs of 10%, rising to 25%, if they oppose the U.S. annexation of Greenland is entirely different, writes Greg Ip for The Wall Street Journal. It would be an unprecedented use of tariffs against an ally for a strategic, as opposed to a domestic, goal.

• Trump Threatens to Hit Countries That Oppose His Greenland Takeover With Tariffs
• Trump Wants Greenland. Markets Don’t Know What to Make of That.
• Market Reaction to Greenland Tensions Has Been Muted, BOE’s Bailey Says
• What a Break With Europe Means for the American Economy
• Europe Contends With a Big New Threat: The U.S.

Economists have learned to stop worrying about Trumponomics. After President Trump announced his “Liberation Day” import tariffs in April, a group of economists regularly surveyed by The Wall Street Journal slashed their forecasts for economic growth in 2025 from over 2% to a measly 0.8%, measured from the fourth quarter of the prior year.

China's benchmark lending rates were left unchanged after the central bank cut rates on its structural monetary policy tools to support economic growth. The one-year loan prime rate was steady at 3.0% and the five-year rate was kept the same at 3.5%, the People's Bank of China said Tuesday. The hold of benchmark rates came one day after lower rates on the PBOC's relending and rediscount facilities took effect. The facilities are typically used to encourage bank lending to high-tech, agricultural and small businesses. All these structural policy tools were lowered by 0.25 percentage point. (Dow Jones Newswires)

• Chinese Policymakers Look Focused on Domestic Demand to Lift Economy

Evidence of a solid recovery in New Zealand's economy continues to mount with services sector activity rising strongly in December, snapping a 21-month downturn. The BNZ-BusinessNZ performance of services index for December was 51.5, up 4.3 points from November, but still below the average of 52.8 over the history of the survey. (DJN))

• A growing share of Canadian firms expect to reduce their payrolls this year in response to trade-policy uncertainty and soft demand, according to a quarterly survey released by the Bank of Canada. Meanwhile, firms report a slight improvement in the sales outlook, after one-third of respondents indicated a decline in sales volume over the past 12 months. Inflation expectations remain anchored within the Bank of Canada's 1%-to-3% target range, with the share of firms expecting "significant" increases in their input and selling prices falling to some of the lowest levels in a decade. (DJN)

The New York Stock Exchange said Monday that it was developing a platform for trading tokenized securities, putting the heft of the 233-year-old exchange behind Wall Street’s growing embrace of the technology behind bitcoin.

11:30 a.m.: Federal Reserve Board of Governors closed meeting

9 a.m.: Johnson Redbook Retail Sales Index
10 a.m.: Construction Spending - Construction Put in Place
10 a.m.: Pending Home Sales Index
10 a.m.: U.S. Supreme Court hears arguments on attempt to remove Federal Reserve Governor Lisa Cook

President Trump could make a decision on the next chair of the Federal Reserve as soon as next week, Treasury Secretary Scott Bessent says. Embattled incumbent Jerome Powell's term as America's top central banker ends in May, with a shortlist of potential candidates emerging to replace him, including BlackRock executive Rick Rieder, Fed governor Christopher Waller and White House economic adviser Kevin Hassett. "The president will reach a decision as soon as next week," Bessent tells CNBC on the sidelines of the World Economic Forum at Davos, Switzerland. —Joshua Kirby

Kevin Warsh is emerging as a potential likely candidate for Federal Reserve Chair and if he is chosen this could support the bond market, Julius Baer's Dario Messi says in a note. Warsh would probably endorse additional interest-rate cuts but without being unduly influenced by political pressure to do so, the head of fixed income says. Warsh is perceived as being less politically aligned or ideologically tied to the administration's demands and his nomination should therefore bolster the Fed's credibility, he says. "Such a profile may help stabilise the term premium and reduce the risk of yield spikes linked to concerns over political influence." The bond market still doesn't appear to be pricing in material threats to Fed independence, Messi says. —Emese Bartha

Threatened additional U.S. tariffs on European nations related to Greenland would have a narrow effect on inflation in Europe, though on activity they are "obviously bad news for everybody," the chief of the Bank of France says. "There could be limited direct inflationary effects but there could also be an appreciation of the euro which plays in the opposite direction, some downside effects on activity," Francois Villeroy de Galhau tells Bloomberg in an interview on the sidelines of the World Economic Forum in Davos. Taking the whole picture, the impact on European inflation is likely to be muted, the ECB governing council member says. Nevertheless, European leaders "must find a political solution to this crisis," he says. Barring a major external shock, Villeroy reiterated that a rate hike this year is "fanciful," though a rate cut remains an option. —Edward Frankl

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 markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.