Trump administration threatens criminal charges against Fed chair
Donald Trump had threatened, just weeks ago, to sue Jerome Powell for "incompetence" but now the prospect of criminal charges are hanging over the head of the Federal Reserve's chief.
Tuesday 13 January 2026 05:50, UK
Financial markets have taken fright amid a resumption of the row over US central bank independence between its chair and the Trump administration.
It emerged on Sunday night that the White House was threatening to indict Jerome Powell over comments he made to Congress in relation to renovation cost over-runs at the Federal Reserve buildings in Washington DC.
Mr Powell, who has been locked in a feud with Mr Trump over the pace of interest rate cuts since his second term as president began, responded by describing the action as a "pretext" to gain more influence over US monetary policy.
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He described the legally biding requests for information as a consequence of not following the "preferences of the president" though the US Attorney for Washington, an ally of President Trump, said the subpoenas were a result of a Federal Reserve failure to respond to requests for information.
The dollar fell widely, and was down a quarter of a cent against the pound, while US stock markets opened lower on Monday. The price of safe haven gold also hit a new record high.
Mr Powell is due to stand down at the end of his second term in May and be replaced by a successor nominated by Mr Trump.
However, a Republican on the Senate banking committee that vets nominees, suggested strong opposition to any Department of Justice (DoJ) investigation into Mr Powell, declaring there would be no progress on selecting a new Fed chair until the conclusion of any legal proceedings.
Other members, from both sides of the political divide, indicated their support for that view while former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan released a statement in support of central bank independence.
Mr Powell said he had been served a subpoena relating to his testimony before the committee in June where he spoke about the Fed's $2.5bn (£1.86bn) renovation of two office buildings - a project that Trump criticised as excessive just weeks ago.
"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.
He then went further, saying this was about whether monetary policy would be set using "evidence and economic conditions" or if it "will be directed by political pressure or intimidation".
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Powell, who was first appointed to the role by Mr Trump and has served under four administrations, said that 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 lower central bank interest rates but has distanced himself from any knowledge of the information requests.
The pace of Fed rate cuts has been slowed through its worries about trade war-linked inflation but it did impose three cuts last year as the labour market suffered.
The DoJ was yet to comment.
The action against Mr Powell emerged about two weeks before Mr Trump's effort to fire another Fed official, governor Lisa Cook, will be argued before the Supreme Court.
Financial analysts said the Trump-Powell row was adding to wider nerves over the potential for US intervention in Iran in the wake of the operation that led to the capture of Venezuela's president.
Karl Schamotta, chief market strategist at Corpay in Toronto, said of the row: "Tonight's revelations mark a dramatic escalation in the administration's effort to kick the legs out from under the Fed, and could unleash a series of unintended consequences that go directly against President Trump's stated aims".
Neil Wilson, investor strategist at Saxo UK, commented: "This is truly unprecedented. You could call it vindictive by Trump, seeing as Powell is leaving in May anyway. But really this is about Trump making it clear to who comes next as Fed chair and to existing policymakers on the FOMC that the White House will set interest rates.
" It's clear there is a large camp within the administration pushing to end Fed independence."