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Federal prosecutors have opened a criminal investigation into U.S. Federal Reserve Chair Jerome H. Powell.
This revolves mainly around his testimony to Congress in June 2025 on the multi-year, multibillion-dollar renovation of the Federal Reserve’s Washington, D.C. headquarters — and whether he may have made false or misleading statements to lawmakers about that project. �
Wikipedia
🔹 DOJ has served grand jury subpoenas to the Federal Reserve and threatened a potential indictment. �
🔹 The probe was authorized in November 2025 by the U.S. Attorney’s Office in D.C. under Jeanine Pirro. �
🔹 No criminal charges have yet been filed, and it’s unclear whether a grand jury has formally convened beyond the subpoenas. �
The Economic Times
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Wikipedia
📉 Market & Financial Impacts (Initial Reaction)
Markets moved quickly:
• U.S. stock futures slid sharply after the news as traders price in political risk to monetary policy. �
• The U.S. dollar weakened — reflecting reduced confidence in Fed independence. �
• Gold spiked to record highs as investors sought safe-haven assets amid uncertainty. �
The National
The National
The National
Market sentiment appears more driven by fear of politicized monetary policy than legal specifics at this stage.
📊 Fed’s Response & Political Context
Powell’s Public Stance:
• Powell released a strong statement calling the investigation “unprecedented” and arguing it’s a pretext for political pressure. �
• He directly connected the threat of prosecution to disagreements over interest-rate policy, not the renovation itself. �
• Powell emphasized his long bipartisan service and commitment to the Fed’s dual mandate (inflation control & maximum employment). �
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Political Overtones:
• The inquiry unfolds amid a broader Trump administration pushback against the Fed’s policy choices — especially resistance to lowering rates. �
• Some lawmakers and former Fed leaders have warned this could erode central bank independence if political pressure becomes normal. �
Wikipedia
AP News
🔎 Key Questions Still Unanswered
➡️ Will Powell face charges? No charges have been filed yet — subpoenas and investigations are not indictments. To charge someone for lying to Congress requires proof of knowing, willful misrepresentation. �
Wikipedia
➡️ Is this purely political? Powell and critics say yes — arguing this measure is tied to rate disputes and administrative pressure. However, DOJ’s legal basis is formally tied to congressional testimony accuracy. �
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➡️ What about independence of the Fed? This situation is already signaling to markets and global central banks that monetary policy may become inseparable from politics — a deeply unsettling prospect for global confidence settings. �
AP News
📍 Context — Why This Matters Globally
📌 The Fed plays a central role in global finance — U.S. interest rates influence global borrowing costs, exchange rates, asset prices, and capital flows.
📌 Any perceived political weakening of the Fed can ripple across equities, FX markets, bond markets, and risk assets worldwide.
📌 Central bank independence was historically defended as crucial to keeping inflation expectations anchored and markets stable.
This case, even without charges, introduces unprecedented political risk into monetary policy decision-making — and that alone drives volatility. �
AP News
🧠 Quick Takeaway (Analyst View)
Key point:
This story isn’t just about a historic renovation or a Fed chair under legal threat.
It’s about a fundamental clash between political authorities and independent monetary policy — with markets reacting accordingly.
Downside risks right now: • Higher volatility in equities & FX
• Shift toward gold/crypto as hedges
• Uncertainty around U.S. interest rate direction
• Concerns about central bank autonomy globally
Upside narrative for markets: If this investigation fails to produce charges and Powell remains in place, markets might stabilize — but confidence could still be dented.
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