The White House is threatening criminal charges against Federal Reserve Chair Jerome Powell over his congressional testimony about renovation costs at Fed buildings. Powell called the move a "pretext" to influence US monetary policy, triggering sharp market sell-offs on Monday as investors feared for the central bank's independence.
Financial markets reacted with alarm. The dollar fell broadly, dropping a quarter of a cent against the pound. US stock futures pointed to a sharply lower open, with the Nasdaq set to plunge around 1% at the opening bell. Gold hit a new record high as investors sought safe havens.
Powell said the threat stems from his June testimony to Congress about $2.5 billion in renovation cost over-runs for two Federal Reserve office buildings in Washington DC. He described the potential charges as politically motivated.
Powell Stands Firm
The Fed chair issued a defiant statement overnight. «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.
He added that effective public service «requires standing firm in the face of threats». Powell questioned whether monetary policy decisions will be based on «evidence and economic conditions» or if they «will be directed by political pressure or intimidation».
Trump-Powell Conflict Escalates
The criminal charges threat represents the latest escalation in a long-running feud between Powell and Donald Trump. Trump had threatened to sue Powell for «incompetence» just weeks earlier.
The dispute centers on interest rate policy. Trump has repeatedly pushed for aggressive rate cuts to reduce borrowing costs. The Fed implemented three rate cuts last year but has slowed the pace due to concerns about trade war-linked inflation.
Powell, who was appointed by Trump and has served under four administrations, is due to stand down at the end of his second term in May. Trump has already nominated his successor.
Broader Attack on Fed Independence
The action against Powell comes approximately two weeks before the Supreme Court will hear arguments on Trump's effort to fire Fed Governor Lisa Cook. A Republican on the Senate banking committee suggested no progress would be made on selecting a new Fed chair until the investigation into Powell concludes.
The developments have fueled wider concerns about political interference in the Federal Reserve's ability to set interest rates independently. Markets were already near record levels when the news broke, with futures data indicating investors rapidly pulled money from the table.
Note: This article was created with Artificial Intelligence (AI).
