By Peter Omopo
US federal prosecutors have opened a criminal inquiry into the Federal Reserve, a move that could lead to an indictment, according to remarks by the central bank’s chairman, Jerome Powell. Powell disclosed on Sunday that the Federal Reserve received grand jury subpoenas on Friday linked to his Senate testimony in June concerning a major renovation project of the Fed’s office buildings.
In a video statement, Powell condemned what he described as “threats and ongoing pressure” from the administration of President Donald Trump, dismissing the subpoenas as “pretexts” following months of public conflict between the White House and the central bank. Trump has repeatedly criticised the Fed for not cutting interest rates more aggressively to stimulate economic growth.
“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, describing the investigation as an “unprecedented action.”
The Federal Reserve, which operates independently of political control, has a dual mandate of maintaining price stability and promoting maximum employment. Its primary policy tool is setting benchmark interest rates that influence borrowing costs across the economy. The Fed’s independence is widely viewed by investors as essential to financial stability, particularly given the global role of US Treasury bonds as a benchmark for government debt worldwide.
President Trump said on Sunday that he was unaware of the Justice Department’s investigation into the Federal Reserve. “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,” Trump was quoted as saying by NBC.
Financial markets reacted cautiously as trading opened on Monday, with the US dollar weakening against major currencies and yields on 10-year Treasury bonds falling. Gold prices rose as investors sought safe-haven assets amid uncertainty. Analysts warned that further interference with the Fed’s independence could weigh heavily on investor confidence.
The investigation has drawn sharp criticism from lawmakers across party lines. Republican Senator Thom Tillis said the credibility of the Justice Department was now in question, adding that he would oppose the confirmation of any future Federal Reserve nominees until the matter is resolved. Senate Minority Leader Chuck Schumer, a Democrat, described the probe as an assault on the central bank’s independence.
Powell’s term as Federal Reserve chair is due to end in May. President Trump has previously indicated that he would judge Powell’s successor on their willingness to cut interest rates swiftly, and has publicly criticised Powell over cost overruns in the renovation of the Fed’s Washington headquarters.
