Federal Reserve Chair Jerome Powell Confronts Political Attacks
Federal Reserve Chairman Jerome Powell has publicly criticized the Trump administration for its ongoing efforts to undermine the central bank’s independence. His remarks come amid a criminal investigation initiated by the Justice Department, which is targeting his testimony related to the renovation of the Fed’s headquarters.
Powell stated in a recent statement that the Justice Department served the Fed with grand jury subpoenas, potentially leading to a criminal indictment over his Senate testimony in June regarding the renovations. He emphasized that the probe is politically motivated and not connected to the actual issues of the project or his statements. Powell dismissed the matter as “pretexts” used to justify the investigation.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation,” he said.
Powell highlighted his commitment to serving under both Republican and Democratic presidents without political bias, focusing on the Fed’s dual mandate of price stability and maximum employment. He stressed that public service sometimes requires standing firm against threats and vowed to continue his role with integrity and dedication.
The investigation reportedly stems from allegations that Powell may have lied to the Senate Banking Committee about the scope of the renovation project, which has ballooned to $2.5 billion. Jeanine Pirro, a Trump ally overseeing the D.C. federal prosecutors office, approved the probe, according to reports.
In response, former President Donald Trump claimed he was unaware of the DOJ subpoenas, stating, “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings.”
Economists like Christopher Hodge of Natixis CIB Americas have noted that while the market has consistently ignored threats to Fed independence, there may be a breaking point. Hodge suggested that if Powell is implicated, the entire board could face similar scrutiny, potentially undermining the Fed’s credibility.
Trump’s attacks on Powell and the Fed have been persistent, particularly regarding the decision not to lower interest rates sooner. When the Fed began easing rates in September, Trump pushed for more aggressive cuts. Additionally, Trump considered firing Powell and even threatened to sue him over the renovation costs. He also attempted to remove Lisa Cook, a Fed governor, over alleged mortgage fraud, though she has denied the claims and the case is now before the Supreme Court.
Powell’s term as Fed chair is set to end in May, and Trump has already indicated he has a successor in mind. Potential candidates include Christopher Waller, Kevin Hassett, and Kevin Warsh. While Powell could continue serving as a Fed governor until 2028, previous chairs typically stepped down after their terms ended.
Observers had expected Powell to follow this tradition, especially after the reappointment of regional presidents eased fears of a Trump-led purge of the Federal Open Market Committee. However, Powell’s strong stance against the Justice Department probe suggests he may not leave the board when his term concludes.
This development underscores the growing tension between the executive branch and the Federal Reserve, raising concerns about the future of an independent monetary policy in the United States.
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