Fed's Powell says Trump administration has threatened him with a criminal indictment

The independence of central banks, at least in setting interest rates in order to control inflation, is considered a central tenet of robust economic ​policy, insulating monetary policymakers from short-term political considerations and allowing them to focus on longer-term efforts to keep prices relatively stable.

The inquiry into Powell “is a low point in Trump's presidency and a low point in the history ‌of central banking in America,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania. “Congress did not design the Fed to reflect the president's daily fluctuations, and because the Fed has rebuffed President Trump's efforts to take the Fed down he is launching the full weight of American criminal law against its Chair.”

Financial markets reflected little change in near-term expectations for Fed policy even after Powell's term as chair ends in May, with rate-futures continuing to price in two rate cuts for the year.

LATEST TRUMP ADMINISTRATION MOVES MARK TURNING POINT?

The subpoenas and statement by Powell mark a stark shift in the now longstanding battle between Trump and Powell. Trump elevated Powell to the chair's job during his first term, but quickly soured on him and made his opinions clear in a series of rebukes and threats.

Powell, for his part, had largely eschewed comment on the president's actions or statements, instead acknowledging that ⁠chief executives often express opinions about a variety of issues, and pledging, as he did in the Sunday statement, to "continue to do ​the job the Senate confirmed me to do."

However, the Trump administration's latest moves, coming within months of the end of Powell’s term ​as chair in May, appear to have marked a turning point, with Powell directly accusing the administration of using the legal system to try to achieve its goal of getting the Fed to lower interest rates further and faster than the central bank's body of 19 policymakers feels is appropriate.

While Powell's term as chair ends in May, he has the right to ‍continue on the Fed board until January 31, 2028, ⁠depriving the president of an additional Fed appointment - what would be Trump's fourth on the seven-member board - until near the end of his term.

The White House began early last year criticizing the Fed's $2.5 billion renovation of two of its buildings in Washington, describing it as overly costly and ostentatious.

Some analysts at the time did call it a pretext for the Trump administration's pressure campaign for lower interest rates, but Powell ⁠did not. The Fed chair instead posted detailed explanations of the work on the central bank's website and sent letters to members of the Trump administration providing background.

In June, when Powell gave his usual twice-yearly testimony on monetary policy to Congress, he was asked repeatedly ‌about the work, which he explained as being necessary updates to outdated infrastructure. In July Trump made a rare presidential visit to the site, and Powell gave him a tour.

(Reporting by Howard ‌Schneider and Ann Saphier; Additional reporting by Trevor Hunnicutt and Michael Derby; Editing by Neil Fullick and Shri Navaratnam)