Trump: "If you really want to fight" - Powell faces criminal investigation threat, interest rate dispute escalates completely

Federal Reserve Chair Powell publicly accused the U.S. Department of Justice of threatening with criminal charges, attempting to force the Federal Reserve to comply with Trump’s interest rate policies. This incident has sparked widespread concerns about the independence of the Federal Reserve in global financial markets, with U.S. stock futures falling and gold and silver prices soaring.
(Background recap: Trump once again threatens to fire Powell: “Incompetent to the point of being prosecutable, Bessent, if you don’t handle this, I’ll fire you.”)
(Additional background: The Fed spokesperson highlights four key points from Powell’s press conference; analysts interpret: no hawkish signals seen.)

On January 11, the Federal Reserve Chairman Jerome Powell (Jerome Powell) released a rare video statement, publicly accusing the U.S. Department of Justice (DOJ) of threatening with criminal charges, attempting to coerce the Fed into yielding to Trump’s interest rate policies. This event quickly became a focal point in global financial markets, raising broad concerns about the Fed’s independence.

Powell emphasized in the statement that such threats are a “consequence” of the Fed setting interest rates based on public interest rather than presidential preferences, calling it a blatant attack on central bank autonomy. This incident is not isolated but represents the latest manifestation of the intertwining of politics and economics during Trump’s second term.

Following the event, U.S. stock index futures declined sharply, with S&P 500 futures dropping over 0.5%, and Dow futures in Asia falling 150 points. Spot gold rose 1.88%, spot silver surged about 4%, and the crypto market BTC remains oscillating near $91,000.

Trump repeatedly dissatisfied with Powell’s “slow rate cuts”

Powell was appointed as Fed Chair by then-President Trump in 2018 and was reappointed in 2022, with a term ending in May 2026. As the central bank’s leader, Powell has overseen the Fed through COVID-19, economic recovery, and high inflation, with policies known for data-driven and gradual adjustments.

However, after Trump’s victory in the 2024 election and his return to the White House, he quickly turned his focus to the Fed. Trump has long criticized Powell for “slow action,” especially regarding interest rate policies. He has repeatedly publicly demanded significant rate cuts to stimulate economic growth and stock market performance, even promising during his campaign to “take control” of the Fed to realize his “America First” economic agenda.

The trigger for this event was a $250 million renovation project at the Fed’s Washington headquarters. Initiated years ago to update aging facilities, it sparked controversy due to cost overruns and transparency issues.

In July 2025, Republican Congressman Anna Paulina Luna (Anna Paulina Luna) accused Powell of providing false testimony to Congress regarding the project and called for a criminal investigation. The charge was not immediately escalated, but after Trump took office, the Justice Department quickly intervened. On January 11, 2026, multiple media reports indicated that the U.S. Attorney’s Office in Washington, D.C., officially opened a criminal investigation into Powell, focusing on whether Powell misled Congress and whether the project’s funding was misused. A grand jury has issued subpoenas requesting relevant records from the Fed.

On January 12, NBC reported that Trump, in a phone interview, stated he was unaware of the Justice Department’s investigation and again criticized Powell. “I know nothing about it, but he’s obviously not doing a good job at the Fed, not building things well either.” When asked how he would respond to Powell’s statement that the subpoenas are government pressure on the Fed to cut rates, Trump said, “No, I wouldn’t even consider using that method. The real pressure is the reality of high interest rates. That’s the only pressure he faces.”

In his video statement, Powell directly linked this to interest rate policy. He pointed out that the Justice Department’s actions are “unprecedented” and aim to pressure the Fed into lowering rates through criminal threats to meet Trump’s demands. Powell reaffirmed that the Fed’s statutory mission is to maintain price stability and maximum employment, not to obey political pressure. He described the incident as a “blatant violation of the Fed’s independence” and implied it is a continuation of Trump’s administration’s pressure on the central bank.

As early as Trump’s first term, Powell had clashed with the White House over refusing to sharply cut rates, leading Trump to publicly label him an “enemy.” The timing of this investigation is particularly sensitive: the most recent Fed meeting kept the benchmark rate in the 4.25%-4.5% range, well above Trump’s preferred level.

Latest data on Polymarket shows that the market’s probability of the Fed holding steady in January has risen to 96%.

Supporters on X see him as a hero defending independence, while critics accuse the Fed of “destroying the economy.” Some netizens say “abolishing the Fed is the right way,” and others warn this could trigger a constitutional crisis.

The investigation is authorized by new U.S. Attorney Jeanine Pirro (Jeanine Pirro), a staunch Trump ally, further deepening concerns about political interference.

Powell responded that he will fully cooperate with the investigation but will not let it influence monetary policy decisions. The root of this incident traces back to the Fed’s institutional design. Established in 1913, the Fed was meant to be independent from politics, but there have been multiple presidential interventions in history, such as during Nixon’s era and Watergate shadows. This incident marks an extension of Trump’s “deregulation” agenda, as he has promised to reorganize federal agencies, including weakening the Fed’s power.

As of January 12, the investigation remains in its early stages, with prosecutors repeatedly requesting documents. The White House has not commented. Analysts predict that if the investigation escalates, the Fed may be forced to accelerate rate cuts to ease pressure, but this could trigger inflation rebound and impact U.S. economic growth.

Powell himself may face personal risks: if charges are substantiated, he could be forced to resign or even face imprisonment, though legal experts believe the evidence is weak.

Powell has actively responded through public statements, and beyond hiring lawyers to challenge subpoenas’ legality, he can appeal to courts or seek bipartisan congressional support, especially from members concerned about the Fed’s independence.

Hasket and Waugh emerge as popular candidates for Fed successor

The criminal charges against Powell have increased market uncertainty. After the incident was exposed, investors worry that the Fed’s independence will be compromised, leading to policy chaos. Powell’s statement emphasized that threats of criminal charges will “damage” the credibility of the central bank, potentially increasing risk premiums.

Furthermore, this incident is seen as a signal of Trump consolidating power, provoking strong backlash from Democrats and social groups. Democratic lawmakers call it a “constitutional crisis,” fearing the Justice Department is being weaponized for political retaliation.

Latest Fed candidate speculation suggests that although Powell’s term lasts until May 2026, the criminal investigation has accelerated discussions about his successor. Trump has said he will announce nominations before the end of the month.

Latest data on Polymarket shows that the highest market probabilities for Fed replacements are Kevin Warsh (Kevin Warsh) at 43% and Kevin Hassett (Kevin Hassett) at 39%. Warsh was nominated by President Bush in 2006 to the Fed Board, becoming the youngest Fed governor at the time. Known for hawkish but market-friendly views, he was considered by Trump in 2017 for Fed Chair but ultimately the position went to Powell.

Hassett is a prominent conservative economist, currently serving as Chair of the White House Council of Economic Advisers, and has previously been a member of the White House Economic Advisory Council. He supports low interest rates and Trump’s economic agenda. In November 2025, he was viewed by Trump and his advisors as the top candidate for the next Fed Chair.

Original link