Powell Under Criminal Investigation: The Independence of U.S. Monetary Policy Faces Unprecedented Challenges

The controversy over the renovation of the Washington headquarters is evolving into a full-blown crisis concerning the independence of the Federal Reserve. Fed Chair Powell responded in a video statement on January 11th, claiming that the criminal investigation by prosecutors is an excuse, and that the real reason lies in the Fed’s insistence on setting interest rates based on economic assessments rather than political will.

01 Breaking News

The U.S. District Attorney’s Office in Washington, D.C., has launched a criminal investigation into Fed Chair Powell. The investigation concerns the Fed’s handling of the Washington headquarters renovation project and whether Powell lied to Congress about the project’s scope.

The total cost of the renovation is approximately $2.5 billion and has been controversial since its inception. The renovation includes necessary work such as asbestos removal, electrical upgrades, and ventilation system improvements.

The trigger for the investigation was Powell’s testimony last June before the Senate Banking Committee. The Department of Justice has served a grand jury subpoena to the Fed, threatening criminal charges.

02 Powell Strikes Back Forcefully

In his January 11th statement, Powell directly attributed the criminal investigation to disagreements with the Trump administration over interest rate policies. He considers this unprecedented and views it against the backdrop of ongoing pressure and frequent threats from the current government.

He explicitly stated: “These are just excuses. The threat of criminal charges is actually because the Fed has always set interest rates based on our best judgment of the public interest, not blindly following the President’s personal preferences.”

Powell emphasized the core issue: “This concerns whether the Fed can still set interest rates based on evidence and economic conditions—or whether monetary policy will be influenced or coerced by political pressure.”

03 Market Immediate Reaction

Following the news of the investigation, financial markets reacted swiftly. The US dollar index and US stock index futures all declined, while international gold and silver prices surged significantly, reaching new historical highs.

As of press time, spot gold rose by 1.88%, and spot silver surged over 4%. Market analysts pointed out that if this matter is seen as severely disrupting Powell’s ability to fulfill his duties as Fed Chair, US stocks and the dollar could face further pressure.

This market reaction fully demonstrates global investors’ concerns about the threat to Fed independence. The Fed’s autonomous decision-making has always been a cornerstone of global financial stability.

04 Long-term Political Struggle

This investigation is not an isolated event but the latest escalation in the long-standing conflict between Trump and Powell. Since Trump assumed the presidency for the second time in January last year, he has been urging the Fed to cut interest rates.

Trump hopes to boost the economy and reduce government borrowing costs. Dissatisfied with the Fed’s failure to actively lower rates, he has repeatedly demanded Powell’s resignation.

He even publicly stated: “I would like to fire him, but we are very close to the end of his term.” Such public pressure is extremely rare in US history and breaks decades of tradition where the White House respects the Fed’s independence.

05 Fed’s Response Strategies

Faced with political pressure, there are still disagreements within the Fed regarding the direction of interest rate policy. Currently, the US federal funds rate remains in the 3.5% - 3.75% range.

Fed Governor Stephen M. Miller expects to cut rates by about 150 basis points by 2026 to support labor market recovery. He believes the underlying inflation rate may run around 2.3%, close to the Fed’s target.

However, not all officials agree with this aggressive easing path. Increasingly, officials prefer to keep rates unchanged until more data on inflation and employment is available. Richmond Fed President Thomas Barkin emphasizes that future monetary policy must adopt a “fine-tuning” approach.

06 Monetary Policy and Crypto Market Linkages

The Fed’s interest rate decisions are closely related to the cryptocurrency market. Loose monetary policy often encourages capital flows into high-risk assets like cryptocurrencies.

According to data from the Gate platform as of January 12th, the crypto market is sensitive to macro policy changes. Bitcoin’s price currently fluctuates around $189,000, with strong investor demand. Meanwhile, Gate’s platform token GT is priced at $10.33, with a 24-hour increase of 0.70%.

Citi Bank’s previous forecast indicates that Bitcoin could reach $143,000 by 2026. Institutional investor interest in digital assets continues to grow, and US regulations on digital currencies are expected to relax further.

07 Controversy Over Successor Candidates

Powell’s term will end in May this year. Trump has stated that he expects to announce Powell’s successor in January 2026.

Market observers generally expect Trump to nominate candidates such as Kevin Hasset, director of the National Economic Council; former Fed Governor Kevin Wacht; or Rick Reeder, Chief Investment Officer of BlackRock Global Fixed Income.

Senate Banking Committee member and Republican Senator Tom Tillis said he will “oppose confirming any Fed nominee—including the upcoming vacancy for Fed Chair—until this legal issue is fully resolved.” This stance could complicate the appointment process for the Fed Chair.

Future Outlook

When news broke that Powell was under criminal investigation, the dollar fell sharply, and gold and silver prices hit new record highs. This underscores the importance of Fed independence to global financial markets.

Senate Banking Committee member Tom Tillis has announced opposition to confirming any Fed nominees unless the investigation is fully resolved. This suggests that the political struggle surrounding the Fed could continue for months.

Regardless of the outcome, the game between US monetary policy and political power has entered an unprecedentedly tense phase. Investors should closely monitor developments to adjust their investment strategies accordingly.