WASHINGTON: The Trump administration’s move to open a criminal investigation into Federal Reserve Chair Jerome Powell escalates the president’s long-running pressure campaign against the central bank, drawing fire from the Fed chief — who called the move a “pretext” to influence interest rates — and condemnation from his predecessors, as well as key members of the Republican Party.

The Justice Department’s threat of indictment, ostensibly focused on comments Powell made to Congress about a building renovation project, also sent rates on longer-term US Treasury bonds up, as investors parsed what a less independent Fed could mean for inflation and monetary policy.

Such a market reaction could, if amplified, constrain Trump’s efforts to reshape the Fed, considered the most influential central bank in the world and a cornerstone of the world financial system. It could also backfire against Trump’s efforts to address broad concerns about “affordability” if long-term borrowing costs rise further.

The independence of central banks, at least in setting rates in order to control inflation, is considered a central tenet of robust economic policy, insulating monetary policymakers from short-term political considerations and allowing them to focus on longer-term efforts to keep prices relatively stable.

Powell terms renovation charges mere ‘pretext’; attempt threatens to upend world financial system

In an extraordinary statement released on Sunday, Powell took aim at the Trump administration’s “unprecedented action” of opening an inquiry against him. He said the Fed received grand jury subpoenas and threats of a criminal indictment relating to his Senate testimony in June.

The issue at hand was a $2.5 billion renovation of Fed headquarters, which Trump has repeatedly attacked Powell over. Last year, the president floated the possibility of firing Powell over cost overruns for the historic buildings’ facelift.

But Powell dismissed the renovation and testimony as “pretexts”.

“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,” he said. He vowed to carry out his duties “without political fear or favour”.

Trump has regularly slammed Powell, calling him a “numbskull” and “moron” for the Fed’s policy decisions and not cutting borrowing costs more sharply.

On Monday, ex-Fed chiefs Ben Berna­nke, Alan Greenspan and Janet Yellen joined other former economic leaders in issuing a sharp criticism of the Department of Justice’s probe. In a joint statement, they called it “an unprecedented attempt to use prosecutorial attacks” to undermine the Fed’s independence.

“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” the statement added.

The independent Fed has a dual mandate to keep prices stable and unemployment low.

Published in Dawn, January 13th, 2026