A criminal probe by the US department of justice (DoJ) into Federal Reserve chair Jerome Powell has sharply escalated president Donald Trump’s long-running feud with the central bank, rattling global markets and triggering bipartisan concern in Congress, with US stock futures sinking sharply on Monday amid fears of political interference in monetary policy.
US futures slid after Mr Powell disclosed that the justice department had served the Federal Reserve with grand jury subpoenas. Dow futures were down close to 360 points, S&P 500 futures fell by about 55 points and NASDAQ futures dropped nearly 275 points. European markets also traded mostly lower after a broad rally across Asia, reflecting investor unease over the implications of the probe for the independence of the world’s most influential central bank.
President Trump, however, denied any involvement in the DoJ's actions. “I don’t know anything about it,” the president told NBC News, while again criticising Mr Powell over interest rates and the Fed’s handling of a US$2.5bn (billion) renovation of two historic office buildings in Washington. Mr Trump says the subpoenas had nothing to do with rate policy and insisted the Fed chair was harming the economy by keeping borrowing costs too high.
As reported first by The New York Times, the investigation focuses on Mr Powell’s testimony before the senate banking committee last June regarding the renovation project, which president Trump has repeatedly described as excessive.
Mr Powell says the threat of a criminal indictment is unprecedented for a sitting Fed chair and warned that it represented a dangerous escalation in pressure from the White House.
In a strongly worded public statement, Mr Powell says the legal action should be seen in the broader context of sustained political pressure aimed at influencing interest rate decisions.
“No one—certainly not the chair of the Federal Reserve—is above the law,” Mr Powell says. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.”
He rejected claims that the investigation is genuinely about the renovation or congressional oversight, calling those explanations 'pretexts'. According to Mr Powell, the threat of criminal charges stemmed from the Fed’s refusal to cut interest rates as aggressively as president Trump has demanded.
“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 says.
Mr Powell added that he had served under four administrations, Republicans and Democrats alike, and had carried out his duties 'without political fear or favour', focused on the Fed’s mandate of price stability and maximum employment.
President Trump rejected Mr Powell’s interpretation, saying he would 'never even think' of using the justice department to influence rate decisions. Instead, he intensified his criticism of the Fed chair’s performance, saying Mr Powell is 'not very good at the Fed' and 'not very good at building buildings'.
The president has repeatedly attacked Mr Powell since returning to office in January 2025, accusing him of holding rates 'far too high' and dragging down economic growth. In December, president Trump publicly floated the idea of suing Mr Powell over the cost of the renovation project and said he would 'love to fire him'.
Mr Powell’s term as Fed chair ends in May, but his seat on the board of governors runs through 2028, meaning he is not required to step down immediately. The latest move by the administration could increase the likelihood that Mr Powell chooses to remain on the board in defiance, limiting president Trump’s ability to quickly reshape the Fed.
The probe drew swift and unusually bipartisan criticism on Capitol Hill. Senator Thom Tillis, a Republican member of the senate banking committee, says the threatened indictment put the justice department’s 'independence and credibility' in question.
In a post on X, Mr Tillis says he would oppose confirmation of any president Trump nominees to the Federal Reserve, including the next Fed chair 'until this legal matter is fully resolved'. He warned that the episode removed any remaining doubt that the administration was actively pushing to undermine the Fed’s independence.
If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question.
Democratic leaders echoed those concerns. In a post on X, senate minority leader Chuck Schumer says president Trump’s actions amounted to bullying that threatened the stability of the US economy, while senator Elizabeth Warren accused the administration of misusing federal authority to pressure the central bank into serving political interests.
Donald Trump’s assault on the Fed’s independence continues, threatening the strength and stability of our economy.
This is the kind of bullying that we’ve all come to expect from Donald Trump and his cronies. Anyone who is independent and doesn’t just fall in line behind Trump… https://t.co/KkVLw3rbfr
The White House declined to comment, referring questions to the justice department. A DoJ spokesperson says the department does not comment on specific cases but is prioritising investigations into potential misuse of public funds. The US attorney’s office in Washington, which is overseeing the probe also declined to comment.
The Federal Reserve has stressed that it does not rely on taxpayer funding, operating instead through service fees, loans and investment income.
As markets digest the implications, analysts warned that the investigation could have lasting consequences. At stake, Mr Powell said, is whether the Federal Reserve can continue to set US monetary policy free from political intimidation, a question that investors, lawmakers and global markets are now watching with growing unease.
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