Analysts were pleased that a known quantity with bona fides was the pick, but Warsh may bring about changes in the Fed that have some concerned.

Warsh, who served on the U.S. central bank's Board of Governors from 2006 to 2011 and has previously advised Trump on economic policy, would succeed Jerome Powell when his term at the helm ends in May.

Over the past five years, January has seen a relatively stable market tone, said Jeff Timlin, managing partner and head of municipal bond investing at Sage Advisory.

"Markets are reading this as a strategic pause, not a policy shift," said Gina Bolvin, president of Bolvin Wealth Management Group.

Analysts don't expect a rate cut at this meeting, but offer thoughts on the year ahead and the to-be-named Fed chair.

Munis were steady Monday following the large cuts the asset class saw last week, specifically on Tuesday, Jan. 20.

Observers said the Supreme Court likely will allow Federal Reserve Gov. Lisa Cook to remain at her post while she challenges her purported removal by President Donald Trump. But her continued presence would slow, rather than stop, the president's quest for a voting majority on the central bank board.

Federal Reserve Vice Chair for Supervision Michelle Bowman warned that labor market conditions could weaken further and said the central bank should avoid signaling a pause in monetary policy.

A handful of former Fed officials noted that the markets' measured response to a probe into Fed Chair Jerome Powell was a result of pushback from Trump allies.

Federal Reserve Gov. Stephen Miran said he doesn't "really buy" the view that a potential indictment of Fed Chair Jerome Powell would affect the central bank's monetary policy.

Panelists diverged sharply on the outlook for 2026 at the Executives' Club of Chicago's Annual Economic Outlook panel, held at a hotel in Chicago's Loop.

"The bond market breathed a sigh of relief this morning as the CPI inflation numbers came in a tad weaker than expected," said John Kerschner, global head of securitised products and portfolio manager at Janus Henderson Investors.

Despite the quiet start to the week for munis, all financial markets may feel a "heightened level of risk for rate volatility over the next few days," said Tim Iltz, a fixed income credit and market analyst at HJ Sims.

Federal Reserve Chair Jerome Powell said the central bank has been served grand jury subpoenas and been threatened with criminal indictment, moves he called "pretexts" to influence interest rates through "political pressure or intimidation."

"With decent job growth in December and a downtick in the federal funds rate, the Federal Reserve will likely hold the federal funds rate steady at [its] next decision in late January," said Comerica Bank Chief Economist Bill Adams.

Minneapolis Federal Reserve President Neel Kashkari said on CNBC that both sides of the central bank's dual mandate show signs of imbalance, with the labor market appearing more vulnerable.

Municipal bond issuers are on tap to sell about $6 billion of new issues in early January, but there should be plenty of money from maturing issues and interest payments to easily absorb that amount, as well as volume going forward, says Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

The Federal Open Market Committee meeting minutes showed the decision was closer than the vote indicated, with "a few" voters suggesting they would have supported no change at the meeting.

With Federal Reserve Chair Jerome Powell's term expiring, there is added uncertainty about monetary policy.

Monetary policy remains the key to the markets. The Federal Open Market Committee predicts one rate cut in 2026, but the panel will get a lot of data before