The Trump administration threatens criminal charges against the Fed chairman. Money news
Financial markets have been spooked by the resumption of a dispute between its chairman and the Trump administration over the independence of the US central bank.
It emerged overnight that the White House was threatening to indict Jerome Powell over comments he made in Congress regarding rising renovation costs at the Federal Reserve buildings in Washington DC.
Mr Powell, who is locked in a dispute with Mr Trump over the pace of interest rate cuts, described the action as a “pretext” to gain greater influence over US monetary policy.
He described the threat of criminal charges as a result of not following “the president’s priorities.”
The dollar fell broadly and was down a quarter of a cent against the pound, while futures indicated US stock markets would open sharply lower as investors considered the implications. The price of safe haven gold also reached a new record high.
Mr Powell will step down at the end of his second term in May and will be replaced by a successor named by Mr Trump.
However, a Republican on the Senate Banking Committee, which vets the nominees, suggested strongly opposing any Justice Department investigation into Mr Powell and declared that there would be no progress on the selection of a new Fed chair until the conclusion of any legal investigation.
Mr. Powell said he had been sent a subpoena related to his testimony before the committee in June, where he discussed the Fed’s $2.5 billion (£1.86 billion) renovation of two office buildings—a project that Trump had highly criticised a few weeks earlier.
Trump again threatens to sue the Fed chief.
Mr Powell said, “The threat of criminal charges is the result of the Federal Reserve setting interest rates based on our best assessment of serving the public rather than following the President’s preferences.”
He then went on to say it was about whether monetary policy would be determined using “evidence and economic conditions” or “guided by political pressure or intimidation.”
served under four administrations,
Powell, who was first appointed to the role by Mr Trump and has served under four administrations, said public service sometimes requires “standing firm in the face of threats”.
Mr Trump has long been seeking cheaper borrowing costs in the US economy through low central bank interest rates.
The Fed has slowed rate cuts due to concerns about inflation linked to the trade war, but it made three cuts last year as the labour market deteriorated.
Fed Chairman Jay Powell engaged in discussions with board member Lisa Cook. Photo: AP
The action against Mr Powell came about two weeks before Trump’s attempt to fire another Fed official, Governor Lisa Cook, will be argued before the Supreme Court.
Financial analysts say the Trump-Powell dispute is raising broader tensions over the potential for the U.S. U.S. The U.S. intervention in Iran follows the operation that resulted in the capture of the Venezuelan president.
While US stock markets were hovering around record levels, some money was taken off the table, according to futures data, which indicated that the tech giant Nasdaq closed down about 1% at the open.
