US prosecutors have opened an inquiry threatening a “criminal indictment” against the US Federal Reserve, its chairman Jerome Powell said, denouncing new “threats and ongoing pressure” from the administration of US President Donald Trump.
Powell said in a rare video statement on Sunday that the US central bank on Friday received grand jury subpoenas related to his Senate testimony in June, which concerned in part a major renovation project of Federal Reserve office buildings.
He dismissed the subpoenas as “pretexts” after months of bitter conflict with Trump, who has publicly excoriated the Fed for not cutting interest rates aggressively to bolster economic growth.
Photo: AFP
“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,” Powell said.
“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 said.
The Fed, which makes independent monetary policy decisions, has a dual mandate to keep prices stable and unemployment low.
Its main tool in doing so is by setting a benchmark interest rate that influences the price of US Treasury bonds and the cost and borrowing across the economy.
The Fed’s independence from political influence is considered vital for investors, who worry that outside meddling in monetary policy would threaten a bedrock of the global economy.
Trump on Sunday said that he had no knowledge of the US Department of Justice’s investigation into the Fed.
“I don’t know anything about it, but he’s certainly not very good at the Fed and he’s not very good at building buildings,” NBC quoted Trump as saying.
Nonetheless, investors reacted warily as financial markets opened yesterday, with the US dollar falling against major currencies along with the 10-year US Treasury bond, while safe-haven assets like gold surged.
US senators from both sides of the aisle blasted the investigation.
“It is now the independence and credibility of the Department of Justice that are in question,” Republican Senator Thom Tillis said.
“I will oppose the confirmation of any nominee for the Fed — including the upcoming Fed Chair vacancy — until this legal matter is fully resolved,” he added.
US Senate Minority Leader Chuck Schumer, a Democrat, called the investigation an assault on the Fed’s independence.
“Anyone who is independent and doesn’t just fall in line behind Trump gets investigated,” Schumer said.
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