US Fed chief Jerome Powell warns of ‘intimidation’ after criminal subpoenas

WASHINGTON - US prosecutors have opened an inquiry threatening a “criminal indictment” against the Federal Reserve,
its chairman Jerome Powell revealed, denouncing new “threats and ongoing pressure” from the administration of President Donald Trump.

Mr Powell said in a rare video statement on Jan 11 that the US central bank received grand jury subpoenas on Jan 9 related to his Senate testimony in June, which concerned in part a major renovation project of Federal Reserve office buildings.

He dismissed the subpoenas as “pretexts” after months of bitter conflict with Mr Trump, who has publicly excoriated the Fed for not cutting interest rates aggressively to bolster 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,” Mr Powell said.

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation,” he said.

The Fed, which makes independent monetary policy decisions, has a dual mandate to keep prices stable and unemployment low.

Its main tool in doing so is by setting a benchmark interest rate that influences the price of US Treasury bonds and the cost and borrowing across the economy.

The Fed’s independence from political influence is considered vital for investors, who worry that outside meddling in monetary policy would threaten a bedrock of the global economy.

“If the Fed acts on politics rather than data, foreign investors could pull back on financing the US debt and seek new safe havens,” said Mr Atakan Bakiskan, US economist at the German investment bank Berenberg.

‘He’s not very good’

Federal Reserve board members typically serve under both Republican and Democratic presidents, and Mr Powell was nominated Fed chairman by Mr Trump during his first term.

But since his re-election in 2025, Mr Trump has relentlessly pressured Mr Powell to move faster in lowering interest rates, in a breach of the long-standing independence of the institution.

Mr Trump said on Jan 11 that he had no knowledge 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,” NBC quoted Mr Trump as saying.

Nonetheless, investors reacted warily as financial markets opened Jan 12, with the dollar falling against major currencies along with the 10-year US Treasury bond, while safe-haven assets like gold surged.

“The combined drop in the dollar, equities and Treasuries was a reminiscence of the ‘sell America’ days of last spring,” when Mr Trump unleashed his global tariffs blitz, said Mr 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.”

‘Corrupt takeover’

Senators from both sides of the aisle blasted the investigation.

“It is now the independence and credibility of the Department of Justice that are in question,” Republican Thom Tillis said.

“I will oppose the confirmation of any nominee for the Fed – including the upcoming Fed Chair vacancy – until this legal matter is fully resolved,” he added.

Senate Minority Leader Chuck Schumer, a Democrat, called the probe an assault on the Fed’s independence, saying: “Anyone who is independent and doesn’t just fall in line behind Trump gets investigated.”

Mr Powell’s term as chairman of the Federal Reserve ends in May, and Mr Trump told Politico in an interview last month that he would judge Mr Powell’s successor on whether they immediately cut rates.

Mr Trump has also spoken openly about ousting Mr Powell but stopped short of doing so and focused instead on cost overruns for renovation of the Fed’s Washington headquarters.

In July, the cost of the Fed’s facelift of its 88-year-old Washington headquarters and a neighbouring building was US$2.5 billion (S$3.2 billion) – up US$600 million from an initial US$1.9-billion estimate.

That same month, Mr Trump made an unusual visit to the construction site during which he and Mr Powell, both clad in hard hats, bickered over the price tag for the makeover. AFP