In an extraordinary public statement, Jerome Powell, the Chair of the US Federal Reserve, has revealed he is facing a criminal investigation instigated by Donald Trump's administration. Powell declared he will not back down, framing the probe as a direct attack on the central bank's cherished political independence for refusing to lower interest rates.
A Steely Defence of the Fed's Mandate
In a video released on Sunday, the typically reserved Powell delivered a defiant message. He stated he had served under four presidents, both Republican and Democrat, always without political bias, focused solely on the Fed's dual mandate of price stability and maximum employment. "Public service sometimes requires standing firm in the face of threats," Powell asserted, marking a stark departure from his usual measured tone.
This confrontation has been building for months. Since returning to the White House, Trump has aggressively pressured the Fed to reduce borrowing costs, aiming to stimulate the economy. With his economic agenda largely unopposed, the central bank's resistance on interest rates has become a focal point for the president's frustration.
From Consensus-Builder to Target
Powell, a registered Republican first appointed to the Fed board by Barack Obama in 2012, was initially seen as a safe, consensus-driven choice when Trump made him chair in 2018. He was reappointed by Joe Biden in 2022. His tenure has navigated immense challenges: the Covid-19 pandemic, a surge in inflation peaking at 9.1% in summer 2022, and Trump's sweeping trade policies.
Despite early criticism for being too slow to tackle post-Covid inflation, Powell has been widely credited with engineering a near-perfect "soft landing." By April of last year, inflation had fallen to 2.3%, its lowest in three years, while unemployment held steady at a low 4.2%.
An Unprecedented Escalation
Trump's campaign against Powell has escalated from verbal insults on social media, where he has called the Fed chair "a stupid person," to handwritten threats and now, an official Department of Justice investigation. Powell dismissed the probe, reportedly focused on renovations at the Fed's headquarters, as a "pretext." He directly linked it to the bank's refusal to follow "the preferences of the president" on monetary policy.
This move thrusts the world's most influential financial institution into uncharted territory. Powell's term as chair is due to end in May, and Trump claims to have already selected a successor. However, Powell warns the stakes are far higher than his own position. The investigation represents a fundamental threat to the institutional integrity of the Federal Reserve itself, established by Congress in 1913 to operate free from political interference.
Economists have long warned that a politicised central bank risks losing its credibility, which can destabilise markets and worsen inflation. Powell's unprecedented public stand signals a pivotal moment in the defence of that critical independence.
