A sweeping legislative proposal introduced in late January 2026 seeks to overhaul the Federal Reserve’s governance structure, triggering a sharp reaction across U.S. financial markets. The bill would empower Congress to appoint a majority of the Federal Open Market Committee (FOMC) voting members, altering decades of central bank independence.
- S.2917 would expand congressional control over the FOMC by increasing elected representatives from three to seven of twelve voting seats.
- 10-year Treasury yield rose from 4.21% to 4.63% following the bill's introduction.
- S&P 500 declined 2.1% in two days, with VIX climbing to 28.4.
- Market odds of a March 2026 rate hike rose from 42% to 64%.
- CPI rose 3.8% year-over-year in December 2025, exceeding Fed’s 2% target.
- Former Fed officials and economists warn that politicizing the Fed risks long-term economic stability.
The U.S. Senate introduced S.2917, the Federal Reserve Accountability and Transparency Act of 2026, which would reconfigure the FOMC by increasing congressional representation from three to seven of the twelve voting seats. This change would grant elected officials direct control over monetary policy decisions, including interest rate adjustments and balance sheet management. The proposal follows growing political pressure amid persistent inflation, with consumer price index (CPI) data showing a year-over-year increase of 3.8% in December 2025, above the Fed’s 2% target. The bill’s passage would mark the most significant challenge to Fed independence since the 1978 Humphrey-Hawkins Act. Under current law, the seven Fed governors are appointed by the president and confirmed by the Senate, while regional Federal Reserve Bank presidents are selected through a private board process. S.2917 would require all FOMC members to be nominated by Congress and confirmed by both chambers, effectively politicizing the central bank’s decision-making framework. Financial markets reacted swiftly. The yield on the 10-year U.S. Treasury note surged from 4.21% to 4.63% within two days of the bill’s introduction, reflecting investor concerns about policy unpredictability. The S&P 500 dropped 2.1%, while the CBOE Volatility Index (VIX) spiked to 28.4, its highest level since October 2023. Treasury futures markets priced in a 64% probability of a rate hike at the March 2026 FOMC meeting, up from 42% before the announcement. The move has drawn opposition from former Fed officials and economists, who warn that political interference could undermine market confidence and hinder long-term economic stability. The Federal Reserve Bank of New York issued a statement emphasizing that “independent monetary policy is essential to maintaining price stability and sustainable growth.” Meanwhile, the White House has signaled cautious opposition, citing risks to the Fed’s credibility, though no formal veto threat has been issued.