The independence and credibility of the U.S. central bank are under threat after the Justice Department launched a criminal investigation into Federal Reserve Chairman Jerome Powell, rocking the U.S. dollar.
US prosecutors launched a criminal investigation against Powell over the $2.5 billion renovation of the Federal Reserve headquarters, as well as his testimony about the project before the Senate Banking Committee in June last year, The Guardian writes.
The move represents a dramatic escalation of long-running tensions between the Federal Reserve and the Trump White House, with the US president repeatedly criticizing Powell for not cutting interest rates more quickly.
After news of the investigation was released last night, Powell hit back, insisting he was facing criminal charges because the Federal Reserve set interest rates based on what he said was a best estimate of what would serve the public, not the president’s preferences.
Powell’s mandate expires in May, and it was already expected that Trump would appoint a “more docile” successor who could lower borrowing costs, Fena reports.
The news that Powell is under criminal investigation has added to concerns that his successor may be running politics for political rather than monetary reasons.
Michael Brown, senior research strategist at brokerage Pepperstone, warns that institutional confidence in the US is again in question. Republican Sen. Thom Tillis, a member of the Senate Banking Committee that considers presidential nominations for the Federal Reserve, has vowed to oppose any of Trump’s nominees, including the future choice of Powell’s successor.
Tillis warned that the threat of indictment calls into question the “independence and credibility” of the Justice Department
