US President Donald Trump’s administration has launched a criminal investigation into Federal Reserve Chairman Jerome Powell, a development that raises concerns about the independence of US monetary policy.
Chairman Powell announced Sunday that the U.S. Department of Justice has subpoenaed the Fed over his testimony to Congress related to the $2.5 billion renovation of the central bank’s headquarters in Washington, D.C.
Recommended stories
list of 4 itemsend of list
Powell said concerns about the upgrade plan were an “excuse” to undermine the central bank’s independence in setting interest rates.
“The threat of criminal charges is the result of the Federal Reserve setting interest rates based on its best assessment of what will serve the public, rather than following the wishes of the president,” Powell said in an unusual video message.
“This is a question about whether the Fed can continue to set interest rates based on evidence and economic conditions, or whether monetary policy will instead be dictated by political pressure and intimidation.”
Powell added that he carried out his duties “without political fear or favor” and with the sole purpose of upholding the central bank’s dual mandate of price stability and maximum employment.
“Public service sometimes requires us to remain resolute in the face of threats,” he said.
“I will continue to do the job that the Senate approved me to do with integrity and a commitment to serving the American people.”
President Trump has repeatedly threatened to fire Powell over his refusal to accelerate rate cuts, and is waging a legal battle to remove him after ordering the firing of Powell’s fellow board member Lisa Cook in August.
President Trump and his allies have also criticized Powell for the cost of the renovation project, which went way over budget.
In July, President Trump’s nominee to head the Federal Housing Finance Agency, Bill Pruitt, asked Congress to investigate Powell for “political bias” and “deceptive” testimony about the renovation project.
President Trump’s pressure campaign has raised concerns that the central bank’s independence will be maintained. The central bank’s ability to set interest rates based on political considerations is considered critical to maintaining confidence in the U.S. economy.
President Trump denied knowledge of the investigation in an interview with NBC News.
“I don’t know anything about that, but he’s certainly not very good at the Fed, and he’s certainly not very good at building buildings,” he said.
U.S. stock futures fell following Chairman Powell’s announcement, and stock futures tracking the benchmark S&P 500 index fell more than 0.4% in morning trading in Asian markets.
Under U.S. law, the president can only remove the Fed chair “for cause,” a provision widely interpreted to mean specific misconduct rather than policy differences.
“Despite the president’s dissatisfaction, the modern Fed’s legislative planners have proven to be skilled,” David Wilcox, a senior fellow at the Peterson Institute for International Economics and director of U.S. economic research at Bloomberg Economics, told Al Jazeera.
“They are intended to allow the Fed to set monetary policy one step away from political control, and so far the Fed’s safeguards continue to function under pressure. In response, the president has resorted to increasingly outlandish tactics. This is the most extreme example yet.”
Powell, who has chaired the Fed since 2018, is scheduled to step down from the top position in May, but his term on the seven-member board remains until January 2028.
Mark Spindell, chief investment officer at Potomac River Capital, said the Trump administration’s move could keep Powell on the board longer than usual.
“I was confident that I would step down in May, when my term as chairman ends. I am no longer so sure,” Spindel told Al Jazeera.
“He’s an institutionalist and will protect what he sees as independence. I’m asking myself, ‘Will this pressure make him consider leaving?'”
President Trump has said that no one with whom he disagrees can lead the central bank, and is expected to name the next Fed chair within the next few weeks.
Kevin Hassett, a proponent of accelerating interest rate cuts and head of President Trump’s National Economic Council, has been widely rumored to be in the position, subject to confirmation by the U.S. Senate.
Thom Tillis, one of the few Republicans in the Senate to criticize Mr. Trump, said Sunday that he would oppose naming Mr. Powell’s successor until the case against him is resolved.
“If there was ever any doubt that advisers within the Trump administration were actively pushing for an end to the independence of the Federal Reserve, there should be no doubt now,” Tillis said.
“The independence and credibility of the Department of Justice is now being called into question.”
