politics
Analysis: The threat to the Fed's independence isn't over
President Donald Trump has waged a long campaign to rein in the Fed. Prosecutors' decision to drop an investigation into Jerome Powell isn't the end.
TL;DR
- A Justice Department probe into Federal Reserve Chair Jerome Powell and renovation cost overruns has been dropped.
- President Trump has repeatedly attacked the independence of the Federal Reserve and pressured for lower interest rates.
- Nominee Kevin Warsh has pledged to keep the Fed independent, but his ability to withstand presidential pressure remains to be seen.
- Senator Thom Tillis had blocked Warsh's nomination pending the investigation, citing concerns about political interference.
- The prosecutor indicated the investigation could be restarted if new facts emerge.
- Trump has previously considered firing Powell and has openly criticized his handling of interest rates.
- The Fed's statutory mandate is to set rates for full employment and low inflation, a model independent central banks in countries like Turkey have struggled to maintain.
- Trump also attempted to remove Fed governor Lisa Cook, alleging mortgage fraud, but this case is pending before the Supreme Court.
- Despite potential confirmation of Warsh, Trump has suggested he would seek Powell's removal if he doesn't leave on time, indicating a continued desire to control Fed policymaking.