January 13 (Reuters) – A remarkable show of support for Federal Reserve Chair Jerome Powell emerged on Tuesday as global central bank leaders and top Wall Street executives voiced their backing, following threats from the Trump administration of a potential criminal indictment. The extraordinary solidarity highlights both Powell’s long-standing relationships within the financial system and the critical role of the U.S. central bank in global markets.
The wave of endorsement came after Republican lawmakers, including members of the Senate Banking Committee with the power to block the president’s choice for a more compliant Fed chair, voiced opposition to Trump’s manoeuvres on Monday. Powell’s current term is set to expire in May.
Late on Sunday, Powell revealed that the U.S. Justice Department had issued subpoenas seeking information about what he disclosed to Congress regarding the $2.5 billion renovation of the Fed’s Washington headquarters. Breaking with his usual non-confrontational stance, Powell described the probe as a deliberate attempt at intimidation designed to pressure the Fed into cutting interest rates.
Even some of Powell’s congressional critics expressed scepticism over the investigation. North Dakota Republican Senator Kevin Cramer acknowledged dissatisfaction with Powell’s testimony last year but noted it was “hardly criminal.” Senate Majority Leader John Thune emphasised that the Justice Department should brief the Senate and warned, “The Federal Reserve is not something to be trifled with. If there is something there, it had better be legitimate.”
President Trump renewed his demand for lower borrowing costs on Tuesday, citing a government report showing a 2.7% increase in consumer prices in December compared with a year earlier. He reiterated his allegations of mismanagement over the Fed’s headquarters renovation, calling Powell either “incompetent or crooked.”
Markets, however, remain unconvinced that a Trump-appointed successor could deliver dramatic policy shifts. Traders continue to anticipate that inflation concerns will delay rate cuts until at least June, with at most two reductions possible this year. Federal Reserve officials echoed the market’s confidence. New York Fed President John Williams said incoming Fed leaders would uphold the central bank’s mandate to maintain price stability and support full employment. St. Louis Fed President Alberto Musalem added, “All of my colleagues and I are committed to setting the best monetary policy for the economy and for all Americans, regardless of who is chair.”
Unprecedented International Support
In a rare joint statement, leaders of the European Central Bank, Bank of England, Bank of Canada, and eight other central banks, including Sweden, Denmark, Switzerland, Australia, South Korea, Brazil, and France, affirmed Powell’s integrity and underscored the importance of central bank independence for market stability.
Wall Street figures also weighed in. JPMorgan CEO Jamie Dimon warned that the probe could backfire by raising inflation expectations, while BNY CEO Robin Vince cautioned that shaking confidence in the Fed could inadvertently push interest rates higher.
Analysts note that political interference in the Fed would destabilise U.S. markets, potentially increase inflation, and reverberate globally through financial markets. The independence of the Fed will return to focus next week when the Supreme Court considers Trump’s attempted removal of Fed Governor Lisa Cook, who denies any wrongdoing.