In a Jan. 11 statement on the matter, Powell emphasized that the investigation related to his testimony before a Senate committee on the Fed’s building renovations is nothing more than an attempt to limit the central bank’s independence.
A Euronews article on the situation notes that the move signifies an unprecedented escalation of President Donald Trump’s fight with the Fed, an independent agency he has repeatedly attacked for not cutting a key rate as sharply as he would like.
The publication therefore suggests that a new round of confrontation between the US president and the Fed chief is likely to shake up financial markets and could eventually lead to higher borrowing costs for mortgages and other loans.
In a statement on Sunday, Jerome Powell directly linked the threat of criminal prosecution to the central bank’s policies rather than the Fed’s renovation data. “The threat of criminal prosecution is a consequence of the Federal Reserve setting interest rates based on our best understanding of what serves the public interest, not following the president’s preferences,” Euronews quoted him as saying. – It’s about whether the Fed can continue to set interest rates based on data and economic conditions, or whether monetary policy will be guided by political pressure and intimidation.”
Analysts have already responded to the new attacks on the Fed with a warning to investors that risks to markets are rising. “We expect the dollar, bonds and stocks to go down on Monday as part of a sell-off in U.S. assets similar to the one last April at the peak of the tariff shock and amid an earlier threat to Powell’s position as Fed chief,” Krishna Guha, an analyst at investment bank Evercore ISI, wrote in a note to clients. – “We are stunned by this deeply troubling development, which came out of nowhere after a period when tensions between Trump and the Fed seemed to have been contained.
Powell’s term as chairman expires in May, and Trump administration officials have signaled that he could name a possible successor as early as this month.
