Powell Says DOJ Probe Is Retaliation for His Refusal to Cut Rates for Trump
Federal Reserve Chair Jerome Powell says a new DOJ criminal probe into renovations at the Fed’s headquarters is politically motivated retaliation for his refusal to lower interest rates at President Trump’s request. The U.S. attorney for Washington, D.C., opened the investigation into whether Powell misled Congress about the size of the renovation project. Powell framed the probe as a threat to central bank independence, arguing monetary policy should be set by economic evidence, not political pressure. The dispute follows repeated public attacks by Trump — including threats to fire Powell and prior actions like attempting to remove Fed officials — and reports that Trump may nominate loyalists who favor rate cuts, notably Kevin Hassett. Powell’s term ends in May, and he warned the probe raises broader questions about whether the Fed can continue to set rates free from intimidation.
Neutral
The news is primarily political and institutional rather than directly economic policy change. Powell frames the DOJ probe as an attack on Fed independence; however, no immediate policy action (like an actual rate cut or change in Fed guidance) has occurred. For crypto markets, central bank independence concerns can influence volatility: markets may react to heightened political pressure if it increases the odds of future rate changes or leadership replacement. Short-term: likely muted to moderate volatility as traders price in political risk and monitor for escalation (statements, legal developments, nominations). Long-term: if the probe leads to removal or replacement of Powell with a rate-cutting nominee, that would be bullish for risk assets including cryptocurrencies because lower rates and easier policy typically support higher asset prices. Conversely, prolonged political interference that undermines policy credibility could increase macro uncertainty and be bearish. Historical parallels: market turbulence followed prior episodes of political attacks on central banks (e.g., Turkey, or U.S. market reactions when Fed leadership faced intense political scrutiny), which produced short-term volatility but only long-term directional shifts when policy actually changed. Given current information, impact is likely neutral-to-moderate rather than clearly bullish or bearish.