Trump denies pressure, Powell sticks to the bottom line: Federal Reserve independence teeters in the political whirlpool

The political confrontation between Trump and Federal Reserve Chair Powell continues to escalate. Trump denied having knowledge of the Department of Justice investigation into Powell during an interview but also criticized Powell’s performance at the Fed once again. Meanwhile, Powell publicly stated that he is facing a criminal investigation threat and refused to yield to Trump’s intimidation. Behind this power standoff, the underlying issue reflects the deep challenges to the independence of the Federal Reserve in the current political environment.

Event Overview: From Denial to Confrontation

According to the latest news, U.S. federal prosecutors have launched an investigation into Powell regarding the renovation of the Federal Reserve headquarters. When asked about this, Trump said he was “not aware of any Department of Justice investigation,” but then took the opportunity to criticize Powell, claiming he “is not doing well at the Fed, and not doing well with the building either.”

Trump further emphasized that he would not pressure Powell through legal means but hinted that the real pressure comes from the “reality of high interest rates.” Although this statement seems to distance himself, it exposes Trump’s dissatisfaction with Fed policies—he believes the Fed should further cut rates.

In stark contrast to Trump’s “denial,” Powell was frank. According to the latest reports, Powell stated that he is facing a criminal investigation, with the Department of Justice threatening the Fed with criminal charges because the Fed refused to follow President Trump’s demand for rate cuts. Powell explicitly stated that he will not succumb to intimidation.

Deep Implications: The Test of the Fed’s Independence

The core issue of this confrontation is not the renovation project itself but the independence of the Federal Reserve.

Based on available information, the Department of Justice’s investigation relates to the Fed’s headquarters renovation, which appears to be a technical matter. However, from the timeline and political context, this investigation is closely linked to Trump’s dissatisfaction with the Fed’s rate-cutting policies. Trump has publicly criticized Powell multiple times for “not doing well,” and now the DOJ investigation provides a tool for pressure.

Powell’s response emphasizes a principled stance: the Fed should not be swayed by political pressure. He pointed out that threatening the Fed with criminal charges is essentially an attempt to force the Fed to change its policy stance through legal means. This touches on the core of modern central banking—independence.

Market Impact and Policy Outlook

This confrontation is particularly complex in the current political environment. According to related reports, the U.S. Supreme Court is reviewing Trump’s tariffs case, which concerns the legality of Trump’s trade policies. Meanwhile, the Democratic Party is pushing anti-insider trading legislation aimed at restricting government officials’ market betting. The entire political ecosystem is highly polarized.

In this context, the Fed faces not only political pressure but also institutional challenges. If the Fed’s independence is weakened, monetary policy could become more susceptible to political cycles, which would have profound implications for financial market stability.

For the cryptocurrency market, the outcome of this confrontation will directly influence the Fed’s policy direction. If Trump succeeds in pressuring the Fed to further cut rates, it could support risk assets, including cryptocurrencies. Conversely, if the Fed maintains its independence, policies may remain relatively steady, and the market impact would be more neutral.

Summary

The confrontation between Trump and Powell is not just a power struggle but also a reflection of the fragility of the Fed’s independence under political pressure. While Trump denies direct pressure, his indirect efforts—such as investigations—are clearly aimed at exerting influence. Powell’s steadfastness represents a defense of central bank independence.

The direction of this confrontation will largely determine the future policy space of the Fed. If the Fed ultimately succumbs to political pressure, the U.S. monetary policy system could undergo profound changes; if it successfully defends its bottom line, it will serve as an important case of resilience in modern central banking. For market participants paying close attention to U.S. policy developments, the ongoing evolution of this confrontation warrants continuous monitoring.