In a significant development, US prosecutors have initiated an investigation into Federal Reserve Chairman Jerome Powell over the renovation of the Fed's headquarters, raising alarm about the central bank's independence. The news has led to a brief plunge in the S&P 500 futures and the value of the US dollar, reflecting investor anxiety.
The Financial Times reported that this investigation could intensify concerns regarding the Fed's autonomy, a fundamental aspect of US economic policy. Eswar Prasad, a Cornell University professor, highlighted that the Trump administration seems intent on exerting direct influence over the Fed's policy decisions through various means, including legal threats.
The Wall Street Journal described the investigation as President Trump's most assertive attempt to bend the Fed to his will, following his persistent demands for interest rate cuts and public criticism of Powell. The President has also raised allegations about the costly renovation of the Fed headquarters.
In a video statement, Powell revealed he received a grand jury subpoena and the threat of criminal charges related to his congressional testimony about the renovation. He criticized this unprecedented action as part of the administration's ongoing pressure on the Fed to align with presidential preferences, rather than public interest.
The New York Times detailed that the renovation, which began in 2022, is now $700 million over budget, costing $2.5 billion. The White House and some Republicans have criticized luxury additions like a rooftop garden and marble decorations as contributing to the overrun.
As Powell's term ends in May, the selection process for the next Fed Chairman is nearing completion. Treasury Secretary Scott Besant announced that President Trump would soon conduct a final interview with potential candidates, including Rick Rieder of BlackRock, before making his nomination by the end of the month.
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