Powell Says DOJ Probe Tied to Trump Pressure Over Fed Rate Cuts

• Powell indicated that this current probe by the DOJ follows “retribution” from Trump on opposition to cuts in interest rates.
• Prosecutors are scrutinizing renovations in the Fed headquarters and Powell’s testimony.
• Complaints of political interference have resurfaced with the Fed probe.

Jerome Powell, the head of the Federal Reserve, recently criticized the Trump administration following the opening of a criminal case against the Federal Reserve concerning the headquarters’ renovation project. According to Powell, the criminal case is a result of political retribution following the refusal by the Federal Reserve to reduce the rates of interest following the demand by President Donald Trump.

Powell reacted to the developments in a public statement he made on Sunday, describing the claims as a “part of an effort designed to weaken the independence of the central bank.” “It is a consequence of the Federal Reserve’s decision to set interest rates through our best assessment of the public interest, rather than in response to a directive from the President,” he explained.

According to reporting cited by the  New York Times, the U.S. attorney for Washington, D.C., opened the inquiry into whether Powell misled Congress regarding the scope and cost of renovations at the Fed’s Washington headquarters. Investigators are reviewing Powell’s statements and analyzing spending records tied to the project.

Powell warns of political intimidation

Powell said that he is in favor of accountability and the rule of law, but maintains that there has been unprecedented pressure exerted on monetary policy issues. “No one, certainly not the chairman of the Federal Reserve, is above the law,” he said. “This unprecedented action must be considered in context in relation to threats to the administration.”

He warned that the stakes surpass the renovation project. Powell said the investigation raises a basic question of whether the Fed can keep pursuing evidence-based and economic-condition interest rate settings, or political interference will be involved.

The comments from Powell come amid an ongoing spat between the White House and the central bank. Trump repeatedly has attacked Powell for keeping rates higher than the administration would prefer. The president has publicly threatened to take legal action related to renovation costs. Trump has called for the removal of Powell, which heightens long-standing concerns about the Fed’s independence.

Probe adds to wider tension between Trump and the Fed

The criminal investigation follows a string of confrontations involving Fed leadership. Trump previously attempted to remove Fed Governor Lisa Cook over mortgage fraud allegations, but the Supreme Court blocked the effort, keeping Cook in her role.

Powell’s term as Fed chair is scheduled to end in May, setting the stage for a sensitive leadership transition. Trump has reportedly considered several loyalists to replace Powell, many of whom have publicly supported rate cuts.

One of the leading candidates is Kevin Hassett, an economic advisor, said to be one of the front-runners. Hassett has said that Trump’s personal views about interest rates would carry “no weight” in decision-making, although markets remain skeptical given the rising political setting.

The administration has already shaped the Fed’s course, placing on the board of governors Stephen Miran, an ally of Trump and an economic adviser, last year. Miran voted for a 0.5 percent rate cut at his first meeting in December, indicating some level of divergence and fueling expectations about future policy changes.

Markets watch independence risk

The unusually outspoken remarks by Powell have further amplified investor focus on institutional stability. Investors consider the independence of the Fed as being crucial to their credibility and financial confidence. With the DOJ investigation currently in progress, market analysts forecast further volatility in risk assets and rate markets.

For now, Powell has drawn a firm line. He insists he will continue to set monetary policy based on data, not threats, and he framed the investigation as a test of whether the U.S. central bank can operate free from political pressure.

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