Central bank chiefs, bank CEOs back Fed’s Powell after Trump administration threat

Global central bank chiefs and top Wall Street bank CEOs lined up in support of Federal Reserve Chair Jerome Powell on Tuesday after the Trump administration threatened him with a criminal indictment, highlighting both the relationships Powell has built during his years at the Fed and the importance of the U.S. central bank to global financial markets.

The solidarity followed pushback from several Republican lawmakers on Monday, including members of the Senate Banking Committee, who have the power to block the president’s nomination of a more compliant successor to Powell.

Powell’s term as Fed chair ends in May. He revealed late on Sunday that the U.S. central bank had received subpoenas from the Justice Department regarding his testimony to Congress about the $2.5 billion renovation of the Fed’s headquarters in Washington. Breaking from his usual non-confrontational approach to President Donald Trump’s repeated threats to fire him, Powell described the probe as intimidation intended to pressure the central bank to lower interest rates.

Some of Powell’s critics in Congress expressed skepticism about the probe. North Dakota Republican Senator Kevin Cramer said Powell’s comments last June were “hardly criminal,” despite dissatisfaction with his testimony. Senate Majority Leader John Thune added that the Justice Department should brief the Senate on the investigation, emphasising that the Federal Reserve “is not something to be trifled with.”

Trump renewed his call for Powell to lower borrowing costs after a government report showed consumer prices rose 2.7% in December from a year earlier. He also repeated accusations of wrongdoing over the renovations, saying Powell was “either incompetent or crooked” and suggesting that a rate cut could be justified. When asked about the timing of appointing a new Fed chief, Trump said a decision would come “sometime in the next few weeks.”

Traders maintained bets that high inflation would prevent the Fed from cutting rates until June and expected that even a Trump-appointed leader would deliver no more than two rate cuts this year. Powell’s Fed colleagues emphasised their commitment to stable monetary policy. New York Fed President John Williams said he hoped anyone taking the role would prioritise price stability and full employment, while St. Louis Fed President Alberto Musalem said that commitment would remain regardless of who chairs the Fed.

In unprecedented support, the heads of the European Central Bank, the Bank of England, the Bank of Canada, and eight other institutions issued a joint statement affirming Powell’s integrity and the importance of central bank independence. JPMorgan CEO Jamie Dimon warned that the probe could backfire by raising inflation expectations, while BNY CEO Robin Vince cautioned against shaking confidence in the Fed.

Independence from government influence has long been a foundation of modern central banking. Political interference could destabilise U.S. markets, push up domestic inflation, and create global financial volatility. The issue will gain renewed attention when the Supreme Court considers Trump’s attempted removal of Fed Governor Lisa Cook, who denies any wrongdoing.

Credit: Reuters