Federal Reserve Chair Faces Criminal Probe as Tensions With White House Explode
Good evening and this is a developing story out of the United States that is sending shockwaves through global financial circles.
For the first time in modern American history, federal prosecutors have opened a criminal inquiry into a sitting chair of the US Federal Reserve. The man at the centre of it all is Jerome Powell, the world’s most powerful central banker and the person who effectively steers US interest rates.
Jerome Powell confirmed that the Justice Department has issued grand jury subpoenas linked to his testimony before the US Senate last year. That testimony focused partly on a long running and costly renovation of historic Federal Reserve buildings in Washington. But Powell says this investigation is about far more than bricks and mortar.
In a sharply worded statement, Powell said the legal threat is tied directly to how the Federal Reserve has been setting interest rates. He argues that rates have been set based on economic evidence and inflation data, not political demands. And he warned that this move represents an attempt to pressure or intimidate the central bank.
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This matters because the Federal Reserve is designed to operate independently of politicians. That independence is meant to protect the economy from short term political interests. When inflation is high, raising rates can be painful. It slows growth, raises borrowing costs and frustrates voters. But central banks are expected to make those calls anyway.
That independence has been under strain for years. President Donald Trump has repeatedly attacked Jerome Powell, accusing him of being too slow to cut interest rates and of damaging economic growth. The two have clashed publicly, even arguing on live television last year over the cost of the Fed’s building renovations.
The White House says the president had no direct knowledge of the investigation, but analysts see this as a dramatic escalation in a long running power struggle.
Economists warn the consequences could reach far beyond Washington. Undermining trust in the US Federal Reserve risks shaking confidence in the global financial system. Investors rely on the idea that America’s central bank is neutral, stable and guided by data, not politics.
There are also international implications. Analysts say this could push up long term interest rates in countries like Australia, raising the cost of government borrowing and adding pressure to global markets.
For now, markets have reacted cautiously, but the concern is longer term. If central bank independence is weakened in the US, it could change how money flows around the world.
Jerome Powell’s term as Fed chair ends in May and his future remains uncertain. But one thing is clear tonight. This is an unprecedented moment for American institutions and the outcome could reshape trust in economic leadership far beyond the United States.
We’ll continue to follow this closely.
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