Central Bankers, CEOs Rally Behind Fed’s Powell Amid Threats

The confrontation between the Trump administration and the Federal Reserve escalated this week following the opening of a criminal investigation into Fed Chair Jerome Powell. The move has triggered bipartisan backlash in Congress, warnings from global credit rating agencies, and an unprecedented show of solidarity from international central bank leaders.

The investigation, revealed late Sunday after the Federal Reserve received subpoenas from the US Justice Department, was initiated by Jeanine Pirro, the US Attorney for Washington, DC. Pirro said the action stemmed from the Federal Reserve’s alleged failure to respond to requests regarding cost overruns tied to a US$2.5 billion renovation project at its headquarters.

Powell issued a sharp public rebuke, describing the probe as a "pretext" aimed at exerting presidential influence over monetary policy and interest rates.

"This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress' oversight role ... Those are pretexts," Powell said. "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."

Market and Rating Agency Reactions

Investors reacted to the threat of indictment by pushing yields on longer-dated US Treasury bonds, reflecting concerns over a potential erosion of central bank independence. While major US stock indexes reached record highs—driven by artificial intelligence stocks and gains in Walmart—gold hit a record high and the US dollar weakened.

Credit rating agencies warned that political interference could undermine the country’s credit standing.Fitch Ratings said Monday that it views Federal Reserve independence as a key support for its AA+ US sovereign rating. Richard Francis, senior director, Fitch, said the agency  would closely monitor “institutional checks and balances” and the Fed’s ability to deliver stable inflation.

S&P Global Ratings  echoed the concern, stating that the US sovereign rating “could come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or the independence of the Fed.” In an October report, S&P described the Fed’s credibility as “unparalleled.”

Congressional and Bipartisan Pushback

The administration's move drew swift criticism from lawmakers across party lines. Republican Senator Thom Tillis, a member of the Senate Banking Committee, called the investigation a “huge mistake” and said he would oppose any Trump nominees to the Fed until the legal matter is resolved.

Senator Lisa Murkowski wrote on X that "the stakes are too high to look the other way: if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer." Even Senator Cynthia Lummis, a frequent critic of Powell, said the use of a criminal statute appears to be a "heavy lift" and that she saw no evidence of "criminal intent."

Former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan issued a joint warning alongside other former economic officials. "This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly," they wrote.

Treasury Secretary Scott Bessent reportedly told President Trump that the investigation "made a mess" and risked destabilizing financial markets.

Global Solidarity

In an unprecedented move, the heads of the European Central Bank (ECB), the Bank of England, the Bank of Canada and eight other major institutions issued a joint statement backing Powell. The initiative was reportedly led by ECB President Christine Lagarde and Pablo Hernández de Cos of the Bank for International Settlements.

"We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell," the statement said. "The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens we serve."

Other signatories included the central bank chiefs of Sweden, Denmark, Switzerland, Australia, South Korea, Brazil, and France. While the Bank of Japan did not initially sign the statement, sources said it expressed support but was not yet prepared to formally join.

Global central bankers warned that political pressure on the Fed could undermine trust in inflation targets and risk politicizing the dollar liquidity facilities that have been critical in stabilizing global markets during periods of stress.

Administration Stance

Powell, who was nominated by Trump in 2017 and confirmed in early 2018, is set to complete his term as Fed chair in May. However, he is not required to leave the Board of Governors until 2028. Analysts say the current pressure could increase the likelihood that Powell remains on the board for the duration of his term.

President Trump told NBC News on Sunday that he had no prior knowledge of the Justice Department’s actions. “I do not know anything about it, but he is certainly not very good at the Fed, and he is not very good at building buildings,” Trump said.

The threat of indictment emerged roughly two weeks before the Supreme Court is scheduled to hear arguments related to Trump’s effort to remove another Fed official, Governor Lisa Cook.

A Justice Department spokesperson declined to comment on the specific case, stating only that “the Attorney General has instructed US Attorneys to prioritize investigations into any misuse of taxpayer funds.”