The U.S. futures market wobbled and the value of the dollar slipped slightly Monday morning, early signs of potential unease among traders after the Federal Reserve said the Justice Department had opened a criminal investigation into Board Chair Jerome H. Powell. Gold, which often spikes in times of uncertainty, also hit record highs. At its peak, spot gold advanced to over $4,600 an ounce, according to LSEG data reported by CNBC.
The probe centers on the central bank’s renovation of its headquarters along the National Mall. But in a statement, Powell accused administration officials of using the threat of prosecution to push the Fed into lowering interest rates.
The prospect of an intensified feud between the Trump administration and the Federal Reserve, whose independence is based on federal law and on norms largely abided by most recent presidents, appeared to inject unwelcome uncertainty for traders.
On Monday morning, Dow Jones Industrial Average futures had slipped by 0.7 percent and the S&P 500 futures by about 0.6 percent.
In the morning’s early hours, the 10-year Treasury yield was up by over two basis points at 4.195 percent while the 30-year note was up more than three basis points.
“The markets are clearly taking a very, very dim view,” said Michael Brown, a London-based market analyst at Pepperstone, pointing to the dollar’s weakness and latest Treasury yields and describing the probe into Powell as “one of if not the most significant threats that we’ve seen since Trump retook office last January against the Fed’s policy independence.”
“The only thing that anyone really wants to buy is hard assets,” Brown in an interview Monday, pointing to spikes in gold and silver as evidence that traders were looking for some degree of certainty. “That’s exactly the reaction you’d expect to see when the market is really questioning, firstly, how independent the Fed is likely to be going forwards and, secondly, how far Trump is likely to take this criminal case.”
Officials at Trump’s Justice Department have targeted several of the president’s perceived foes since last year, although the efforts so far have proved largely unsuccessful in the courts. Criminal investigations or charges have been brought against New York Attorney General Letitia James (D), Sen. Adam Schiff (D-California) and former FBI director James B. Comey, who like Powell, was investigated for making allegedly false statements to Congress.
The inquiry follows public demands by Trump for the bank to cut interest rates sharply and open contemplation that he might fire Powell, whom he nominated during his first term in 2017. Last month, Trump said he might sue him for “gross incompetence.”
In a statement posted to its website Sunday, the Federal Reserve confirmed it had received subpoenas relating to Powell’s Senate testimony about renovations to its headquarters. In response, Powell accused the administration of using criminal proceedings to pressure the central bank to lower interest rates, a challenge to its independence.
“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,” Powell said in a video and statement posted to the central bank’s website Sunday.
In an interview with NBC News on Sunday Night, Trump denied having any knowledge of the criminal probe. “No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got,” he said.
In response to the probe, Democrats accused administration officials of weaponizing the Justice Department to undercut the central bank’s independence.
Sen. Elizabeth Warren (D-Massachusetts), the ranking member of the Senate Budget Committee, accused Trump of trying to remove Powell and install another “sock puppet to complete his corrupt takeover of America’s central bank.”
The ranking member of the House Budget Committee, Rep. Brendan Boyle (D-Pennsylvania), said, “Trump is undermining the independence of the central bank, which will weaken our economy and destabilize markets.”
Sen. Thom Tillis (R-North Carolina) was one of few Republicans to openly criticize the probe. In a post on X, he said he would oppose any nomination for Powell’s successor, and any other nomination for the Fed as well, until the legal matter is resolved. “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,” he said.
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