DOJ Probe of Fed Chair Powell Prompts Global Defense of Central-Bank Independence

Overview

• The Justice Department has opened a criminal investigation alleging Jerome Powell lied in congressional testimony about renovations to the Federal Reserve’s Washington headquarters.
• In a video statement, Powell said the dispute centers on whether monetary policy will be driven by evidence or by intimidation from political actors.
• Central bank leaders from Europe, the United Kingdom, Sweden, Denmark, Switzerland, Australia, Canada, South Korea and Brazil signed a letter backing Powell and affirming monetary independence.
• Editorial analysis cautions that attempts to control the Fed could endanger the global financial system given the Fed’s role in Treasury issuance and the stability of the dollar.
• President Trump previously sought Powell’s ouster and is reportedly pressuring him to give up a board seat he holds through 2028, while economist Paul Krugman argues the intimidation effort will likely backfire on rate policy.