Powell and the Fed's Biggest Test of Independence
The Federal Reserve (Fed) is back in the spotlight after receiving a subpoena from the US Department of Justice regarding Fed Chairman Jerome Powell's testimony before Congress last June. The subpoena relates to the Fed headquarters renovation project, whose construction costs have skyrocketed, sparking public questions and increasing political pressure.
In his statement, Powell defended the Fed's independence and asserted that this pressure arises because the central bank sets interest rates based on the public interest, not the President's wishes. The Trump administration reportedly views the renovation project as an opportunity to challenge Powell's position, although President Trump has denied any knowledge of the investigation. The process is still in the evidence-gathering stage and could end without charges.
The cost of the Fed headquarters renovation has increased from US$1.9 billion in 2023 to US$2.5 billion. Powell explained that the cost increase was due to rising prices for materials, equipment, and labor, as well as unforeseen technical issues such as toxic contamination. He emphasized that the cost overrun was not due to lavish amenities, such as the alleged golden ballroom.
Many analysts believe these allegations are politically motivated and unlikely to yield evidence against Powell. However, this pressure still has the potential to impact monetary policy. If challenges to the Fed's independence persist, the central bank could adopt a more hawkish stance to maintain its credibility, meaning interest rate cuts could be delayed, even though markets had previously expected easing to begin this year. (alg)
Source: Newsmaker.id
