Federal Reserve Chair Jerome Powell has disclosed receiving a grand jury subpoena from the Department of Justice, harshly criticizing it as an unprecedented move that threatens central bank independence. Financial markets reacted swiftly, with both the dollar and stock index futures falling amid concerns over the Fed’s autonomy.
Powell revealed in a statement on January 11 that the Fed received the subpoena on January 9. The inquiry reportedly relates to a renovation project at the Fed’s headquarters, which Powell mentioned during Senate testimony last June.
The subpoena centers on whether Powell committed perjury regarding the 2.5 billion USD renovation project. Department of Justice is particularly scrutinizing Powell’s testimony that the project excluded luxury amenities such as VIP-only restaurants, verifying if it aligns with actual plans.
Powell dismissed the criminal probe as a pretext for political retaliation. He argued, “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.” He emphasized, “this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
Trump has repeatedly pressured Powell to cut interest rates more aggressively, disregarding the Fed’s dual mandate of price stability and maximum employment. Trump has publicly demanded Powell’s resignation and, in a December interview, stated that his primary criterion for nominating a successor when Powell’s term ends in May would be a willingness to execute immediate rate cuts.
Markets reacted immediately. The dollar weakened 0.2% in Asian trading, while S&P 500 futures dropped 0.5%. Gold prices surged nearly 2% to record highs, and the Swiss franc strengthened as investors sought safe havens.
Market analysts predict increased volatility as tensions between the Trump administration and the Fed escalate. Nick Twidale, chief market analyst at AT Global Markets, noted, “The investigation into Powell sends a troubling signal to the Fed, the administration, and the entire market. Powell seems ready for a showdown with the President.”
Beyond the Fed independence controversy, geopolitical risks are also rattling markets. With oil prices fluctuating due to unrest in Iran and Venezuela, experts warn that global markets face unprecedented uncertainty, rivaling levels not seen since the late 1930s.
Speculation is mounting that Trump may soon nominate a Fed chair candidate who favors aggressive rate cuts, potentially exacerbating internal Fed conflicts and policy uncertainty.
