United States President Donald Trump’s administration has opened a criminal investigation into Federal Reserve Chair Jerome Powell, a development set to heighten concerns about the independence of US monetary policy.
Powell said on Sunday that the US Department of Justice had served the Fed with subpoenas over testimony he made before Congress related to the $2.5bn renovation of the central bank’s headquarters in Washington, DC.
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Powell said concerns about the renovation project were “pretexts” to undermine the central bank’s independence in setting interest rates.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said in a rare video message.
“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.”
Powell added that he had carried out his duties “without political fear or favour” and with the sole purpose of upholding the central bank’s dual mandate of price stability and maximum employment.
“Public service sometimes requires standing firm in the face of threats,” he said.
“I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.”
Trump has repeatedly threatened to fire Powell over his refusal to cut interest rates faster, and is waging a legal battle to remove Lisa Cook, Powell’s fellow board governor, after ordering her removal in August.
Trump and his allies have also lashed out at Powell over the cost and management of the Fed refurbishment project, which has run significantly over budget.
In July, Bill Pulte, a Trump appointee who leads the Federal Housing Finance Agency, called on Congress to investigate Powell over his alleged “political bias” and “deceptive” testimony about the renovations.
Trump’s pressure campaign has raised fears about the continuing independence of the central bank, whose ability to set interest rates free from political considerations is considered crucial to maintaining confidence in the US economy.
US stock futures fell after Powell’s announcement, with those tied to the benchmark S&P 500 dropping more than 0.4 percent in morning trading in Asia. The US dollar fell about 0.2 percent against major currencies.
In an interview with NBC News, Trump denied any knowledge of the investigation.
“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,” he said.
Under US law, the president may only fire the Fed chair “for cause”, a provision widely interpreted to mean specific misconduct, not differences over policy.
“Much to the president’s frustration, the legislative architects of the modern Fed turn out to have been good at their craft,” David Wilcox, a senior fellow at the Peterson Institute for International Economics and the director of US economic research at Bloomberg Economics, told Al Jazeera.
“They meant to allow the Fed to set monetary policy one step removed from political control, and, so far, their safeguards have stood up under pressure. In response, the president has resorted to increasingly outlandish tactics. This one is the most extreme example yet.”
Powell, who has served as Fed Chair since 2018, is due to step down from the top role in May, though his term on the seven-member board of governors does not expire until January 2028.
Mark Spindel, chief investment officer at Potomac River Capital, said the Trump administration’s latest move could encourage Powell to stay on the board longer than he would have otherwise.
“I was sure he was going to leave in May when his chairmanship ends. Now, I’m less sure,” Spindel told Al Jazeera.
“He is an institutionalist, and will defend its independence as he sees it. I’m asking myself, ‘Does this pressure make him rethink leaving?’”
Trump, who has said that anyone who disagrees with him cannot lead the central bank, is expected to name his pick for the next Fed Chair within weeks.
Kevin Hassett, the head of Trump’s National Economic Council and a proponent of bigger interest rate cuts, has been widely tipped for the role, which requires confirmation by the US Senate.
Thom Tillis, one of the few Republican critics of Trump in the Senate, said on Sunday that he would oppose the nomination of Powell’s successor until the legal case against him is resolved.
“If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” said Tillis, who sits on the Senate’s banking committee.
“It is now the independence and credibility of the Department of Justice that are in question.”
Elizabeth Warren, a Democrat who also sits on the Senate’s banking committee, accused Trump of orchestrating a “corrupt takeover” of the central bank.
“He is abusing the law like a wannabe dictator so the Fed serves him and his billionaire friends,” Warren said in a post on social media.
“The Senate must not move ANY Trump Fed nominee.”
