Federal Reserve (Fed) Chair Jerome Powell, who had avoided clashes despite intense pressure from U.S. President Donald Trump, broke with precedent by openly defying the president as he became embroiled in allegations of misappropriating Central Bank federal funds. Powell is set to step down in May.
On the 11th, Powell said in a video message, "On the 9th, in connection with my testimony about the Fed headquarters renovation, I received a grand jury subpoena and threats of criminal indictment from the Ministry of Justice," noting, "This situation arose because the Fed set interest rates based on the public interest, not the president's preferences."
Earlier, Trump continued to express his intent to dismiss Powell, who had refused to cut rates, and escalated pressure by using the Fed building's renovation work as a pretext starting last summer. Trump claims the construction expense was executed above the originally planned budget.
In fact, in July, Trump visited the construction site at the Washington, D.C., headquarters and said publicly, "It looks like the budget is about $3.1 billion," adding, "$2.7 billion became $3.1 billion."
According to the Wall Street Journal (WSJ), Minister Pam Bondi on the 12th ordered investigators to "prioritize the misuse of taxpayer money." The possibility of indicting Powell has effectively become real, which is seen as an unprecedented development.
Powell countered that "the construction expense is merely a pretext, and the context of threats and sustained pressure from the administration must be considered." Since taking office last year, Trump has openly pressured the Fed to cut rates, disregarding its independence.
Trump in particular has argued that the benchmark rate should be lowered to 1%, but Powell proceeded to set rates regardless. During Trump's second term, the Fed cut rates three times by 0.75 percentage point (p) each. In response, Trump called Powell a "moron" and a "stubborn mule."
This is not the first time Trump has intervened deeply in Fed personnel. A notable case was his abrupt notice of dismissal to Fed Governor Lisa Cook, a "hawk" (tightening bias), on allegations of mortgage loan fraud. Cook has challenged the decision in court and is set to have a hearing at the U.S. Supreme Court on the 21st.
Afterward, former Governor Adriana Kugler, previously categorized as a hawk, resigned early, and he appointed Governor Steven Myron, known as his closest aide and as the architect of tariff policy. It is expected that after Powell steps down in May, he will nominate a "dove" (easing bias) who is compliant with him.
Powell had refrained from directly addressing Trump's attacks and emphasized only the Fed's independence, but analysts say circumstances have shifted this time. Douglas Elmendorf, a Harvard professor and former director of the Congressional Budget Office, said, "The Fed seems to have recognized that the current administration will pressure individuals and organizations until it gets what it wants," adding, "If it does not want to yield, it has to fight back."
After Powell's response, former and current Fed chairs and former treasury secretaries issued statements of support in unison. Former Fed Chair Janet Yellen said, "This is the most serious attack on the Fed's independence," adding, "If it goes so far as to intimidate Fed personnel to push through policy, that is the collapse of the rule of law and the end of the Fed's independence."
Meanwhile, Trump says he did not intervene in the investigation of Powell. He said he "has no idea" about the probe, and White House Spokesperson Karoline Leavitt also said, "President Trump did not order an investigation."