The US Department of Justice has launched a criminal investigation of Federal Reserve chairman Jerome Powell, a move Powell said is motivated by the White House's desire to dictate the bank's policy decisions.
In a statement posted online on Sunday, Powell said the Fed received grand jury subpoenas on 9 January threatening a criminal indictment for his testimony before the Senate Banking Committee in June about renovations to Fed office buildings.
Calling the probe "an unprecedented action", Powell dismissed questions about the renovations and his testimony as "pretexts".
The threat of criminal charges stems from the Fed "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," Powell said.
By conducting a criminal probe of the US' central banker, the administration runs the risk of stoking investors' fears about political interference in Fed policy.
Powell, who was appointed to his post by Trump in 2017 during his first term, has faced consistent pressure and criticism from the president in his second term for being too slow to cut rates. Powell's term ends in May, but Trump has threatened to fire him before then and has tasked treasury secretary Scott Bessent to interview replacements.
During its most recent meeting in early December, the Fed cut its target interest rate by a quarter point to 3.5-3.75pc, the third reduction in 2025, as it tried to balance a weakening jobs market with stubbornly high inflation.
At that meeting Fed officials penciled in a single quarter-point rate cut in 2026 with a similar cut the following year.
The next meeting of the Federal Reserve Open Market Committee is 27-28 January.
