Federal Reserve chair Jerome Powell denounces criminal investigation as political intimidation, threatening the central bank’s independence.
WASHINGTON: Federal Reserve chair Jerome Powell has denounced a criminal investigation into the central bank as political intimidation.
Powell revealed in a rare video statement that US prosecutors served grand jury subpoenas related to his Senate testimony in June.
He dismissed the subpoenas as “pretexts” after months of conflict with President Donald Trump over 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.
“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.”
The investigation partly concerns a major renovation project of Federal Reserve office buildings in Washington.
Trump has publicly excoriated the Fed for not cutting interest rates more aggressively to bolster economic growth.
The Fed’s independence from political influence is considered vital for global investors and economic stability.
“If the Fed acts on politics rather than data, foreign investors could pull back on financing the US debt and seek new safe havens,” said Atakan Bakiskan, a US economist at Berenberg.
Financial markets reacted warily, with the dollar falling against major currencies alongside US Treasury bonds.
Safe-haven assets like gold surged as investors assessed the risks.
“The downside risks for the dollar from any indications of further determination to interfere with the Fed’s independence are substantial,” said ING strategist Francesco Pesole.
Trump told NBC he had no knowledge of the Justice Department’s 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,” the president said.
Senators from both parties blasted the investigation, questioning its motives.
“It is now the independence and credibility of the Department of Justice that are in question,” Republican Thom Tillis said.
Senate Minority Leader Chuck Schumer, a Democrat, called the probe an assault on the Fed’s independence.
Powell’s term as chairman ends in May, and Trump has spoken openly about ousting him.
The president has instead focused publicly on cost overruns for the renovation of the Fed’s Washington headquarters.
The project’s cost has risen by USD 600 million from an initial USD 1.9 billion estimate.
