In Washington, US prosecutors have launched a criminal investigation into Federal Reserve Chair Jerome Powell over a $2.5bn reconstruction of the Fed’s headquarters, sharply escalating the standoff between Donald Trump’s administration and the central bank.
A day earlier, Powell said that on Friday the Fed received grand jury subpoenas and a notice from the justice department threatening criminal charges linked to his testimony before Congress on the reconstruction project. According to Powell, the legal action is being used as a pretext to pressure the regulator’s independence in setting interest rates. US President Donald Trump has repeatedly criticised Powell, calling him a “stubborn mule” for refusing to sharply cut borrowing costs.
“This new threat is not related to my testimony last June or to the reconstruction of Federal Reserve buildings,” Powell said. “The threat of criminal charges stems from the fact that the Federal Reserve sets interest rates based on our best assessment of what serves the public interest, rather than the president’s preferences.”
Trump denied any involvement in the justice department’s investigation.
The investigation is set to deepen investor concerns about the independence of the world’s most important central bank—a cornerstone of US economic policy widely seen as essential to the stability of financial markets.