Jerome Powell faces DOJ criminal probe as questions mount over Fed autonomy

The US justice department has launched a criminal investigation into Federal Reserve chairman Jerome Powell.

In a video, Jerome Powell announced that the department is investigating him over his past comments about renovations to Federal Reserve buildings.

Moreover, federal prosecutors also served the agency with subpoenas and threatened a criminal indictment over testimony in Congress.

According to the chairman, the recent move highlights the Trump administration’s effort to curtail the autonomy of the central bank and gain more influence over interest rates that the US President wants to cut dramatically.

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said in a video.

“I have deep respect for the rule of law and for accountability in our democracy. No one, certainly not the chair of the Federal Reserve, is above the law, but this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure,” Federal Reserve Chairman added.

However, Trump refused to acknowledge the DOJ’s investigation into the Fed during an interview with NBC News on Sunday.

The recently launched criminal probe has also raised questions over the autonomy of the Fed as it is designed to make monetary decisions and policies based on what is best for the economy without undue influence by elected officials or presidents.

On the contrary, President Trump wants the Fed to lower interest rates to make borrowing money cheaper, thereby strengthening his political appeal.

Karl Schamotta, chief market strategist at Corpay in Toronto said, “Tonight’s revelations mark a dramatic escalation in the administration’s effort to kick the legs out from under the Fed, and could unleash a series of unintended consequences that go directly against President Trump’s stated aims.”

Besides this recent conflict, Trump has repeatedly threatened to remove Powell. According to critics and analysts, Trump’s pressure to remove the Fed chairman would jeopardise the bank’s authority and credibility.

According to North Carolina Senator Thom Tillis, a Republican who is a member of the Senate Banking Committee, "If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none.”

The elected officials’ undue control over the Fed would also disturb US economic policy as the interest rates play an important role in controlling inflation.

Previously, the Trump administration tried to fire Lisa Cook, a governor at the US central bank, on the grounds of mortgage fraud. But this move was blocked by a US federal court.

According to the New York Times, the US Attorney's Office for the District of Columbia will supervise Jerome Powell’s investigation.