ABUJA, Nigeria (VOICE OF NAIJA)-US prosecutors have launched an investigation that could lead to a criminal indictment of the Federal Reserve, Chairman Jerome Powell said Sunday, condemning what he described as new threats and ongoing pressure from President Donald Trump’s administration.
In a video statement, Powell said the US central bank received grand jury subpoenas on Friday tied to his Senate testimony in June, which addressed a large-scale renovation of Federal Reserve office buildings.
He rejected the subpoenas as pretexts, coming after months of escalating tensions with Trump, who has repeatedly attacked the Fed for failing to slash interest rates more aggressively to stimulate economic growth.
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“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 described the “unprecedented action” as part of the “administration’s threats and ongoing pressure.”
The Federal Reserve, which operates independently in making monetary policy, has a dual mandate of keeping prices stable and unemployment low. Its primary instrument for achieving these goals is setting a benchmark interest rate that affects borrowing costs throughout the economy.
For decades, US Treasury bonds have served as a key indicator of the health of the world’s largest economy and as the de facto benchmark for government bond yields worldwide.
The Fed’s insulation from political interference is seen as crucial by investors, who fear that meddling in monetary policy could undermine a cornerstone of the global financial system.
– ‘He’s not very good’ –
Members of the Federal Reserve Board usually serve under both Republican and Democratic presidents, and Powell himself was appointed Fed chair by Trump during his first term.
However, since his re-election last year, Trump has persistently pressured Powell to accelerate interest rate cuts, challenging the institution’s long-standing independence.
Trump said Sunday that he was unaware of the Justice Department’s investigation into the Fed. “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,” NBC quoted Trump as saying.
Even so, markets reacted cautiously as trading opened Monday.
The dollar weakened against major currencies, and the 10-year US Treasury bond a global benchmark also fell. Investors moved toward safe-haven assets, with gold prices rising amid uncertainty.
“The combined drop in the dollar, equities and Treasuries was a reminiscence of the ‘sell America’ days of last spring,” when Trump rolled out a sweeping global tariffs campaign, said Francesco Pesole, a strategist at ING in London.
“The downside risks for the dollar from any indications of further determination to interfere with the Fed’s independence are substantial.”
Lawmakers from both parties sharply criticized the investigation. Republican Senator Thom Tillis said, “It is now the independence and credibility of the Department of Justice that are in question.”
He added, “I will oppose the confirmation of any nominee for the Fed including the upcoming Fed Chair vacancy until this legal matter is fully resolved.”
Senate Minority Leader Chuck Schumer, a Democrat, called the probe an attack on the Fed’s autonomy. “Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” Schumer said.
Powell’s term as Federal Reserve chair ends in May, and Trump told Politico last month that he would evaluate Powell’s replacement based on whether they immediately cut interest rates.
Trump has also openly discussed removing Powell but has stopped short of doing so, instead focusing on cost overruns tied to renovations of the Fed’s Washington headquarters.
In July, the projected cost of refurbishing the Fed’s 88-year-old headquarters and a neighboring building rose by $600 million from an initial estimate of $1.9 billion.
That same month, Trump made a rare visit to the construction site, where he and Powell both wearing hard hats argued over the escalating cost of the project.
AFP