The Trump administration has reportedly threatened to indict Federal Reserve Chair Jerome Powell over comments regarding a building renovation project. Powell dismissed the action as a “pretext” to exert influence over interest rate policy. The initial market reaction was muted, but Powell’s response indicates a deepening conflict with the White House.
According to Powell, the Fed received subpoenas related to remarks he made about cost overruns for a $2.5 billion building renovation project. He stated that the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on its assessment of the public good, rather than presidential preferences. Republican Senator Thom Tillis questioned the Department of Justice’s independence and credibility, opposing any Trump nominees to the Fed until the matter is resolved.
The immediate market impact was limited. U.S. stock futures dipped slightly, and the rates market priced in a slightly higher chance of near-term interest rate cuts. The dollar experienced the most significant reaction, falling against a basket of currencies. Investors shifted into safe havens, with gold hitting a record high and the Swiss franc strengthening. Chinese stocks rose, while European shares dipped, possibly due to Trump’s call for a credit card interest rate cap.
In other news, escalating protests in Iran have been met with a violent crackdown. Despite the unrest and potential for U.S. intervention, oil prices have remained relatively stable. The situation continues to be monitored closely, with Trump expected to discuss options for Iran with senior advisors.
