Financial markets reacted sharply to news that Federal Reserve (Fed) Chairman Jerome Powell faces a criminal investigation related to his congressional testimony about the central bank’s headquarters renovation, with investors seeking refuge in safe haven assets.
Gold surged to a record high above $4,600 per ounce on January 12, while United States (US) stock futures declined and the dollar weakened as traders priced heightened uncertainty around monetary policy independence.
Powell announced on January 11 that the Department of Justice (DOJ) served the Fed with grand jury subpoenas on January 10, threatening criminal indictment over his June testimony before the Senate Banking Committee regarding the $2.5 billion renovation project.
The Fed chairman characterized the investigation as political pressure rather than legitimate oversight. Powell stated the threat of criminal charges stems from the Federal Reserve setting interest rates based on economic assessment rather than following presidential preferences.
Nigel Green, chief executive officer (CEO) of deVere Group, which manages approximately $14 billion in assets globally, warned that markets will not tolerate interference in monetary policy. He described the situation as thinly veiled pressure related to interest rates rather than genuine concern about building renovations.
Stock futures for the Dow Jones, Standard and Poor’s (S&P) 500 and Nasdaq all declined sharply following Powell’s statement. Nasdaq 100 futures fell approximately 0.8 percent, S&P 500 futures dropped roughly 0.5 percent, and Dow Jones Industrial Average futures declined about 0.4 percent in late evening trading on January 11.
Spot gold jumped 1.9 percent to $4,596.05 per ounce after hitting a record high of $4,600.33 earlier in the session on January 12. US gold futures for February delivery gained 2.3 percent to $4,606.20. Silver prices jumped more than 4 percent, reflecting demand for protection against political and monetary instability.
The US dollar index fell, with losses against major currencies including the euro and Swiss franc, signaling diminished confidence in the world’s dominant reserve currency amid concerns about monetary policy credibility.
Green stated that central bank independence protects long term economic health from short term political cycles. Once political pressure begins shaping interest rate decisions, inflation expectations become unanchored, bond yields rise to compensate for uncertainty, and stock markets face higher volatility.
North Carolina Republican Senator Thom Tillis, who serves on the Banking Committee, stated he would oppose any nominee by President Donald Trump to replace Powell and any Fed board nominee until the legal matter is fully resolved.
Trump denied knowledge of the investigation in an interview with NBC News, saying he did not know anything about it. However, Trump has repeatedly criticized Powell for not cutting interest rates more aggressively, calling Fed officials “boneheads” and once referring to Powell as a golfer who cannot putt.
The Fed cut rates three times in 2025, bringing the benchmark federal funds rate to a range of 3.50 percent to 3.75 percent. Trump has continued pressing for additional cuts despite Fed officials signaling they were unlikely to reduce rates again in the near future.
Representative Anna Paulina Luna, a Florida Republican, referred Powell to the DOJ in July 2025 for potential crimes of perjury and false statements to federal officials in connection with his testimony about the renovation project. Luna claimed Powell lied under oath to Congress and misrepresented facts in official communications.
At the June Senate Banking Committee hearing, Chairman Tim Scott, a South Carolina Republican, stated the Fed’s building renovation included rooftop terraces, custom elevators opening into VIP dining rooms, white marble finishes and a private art collection. Powell disputed those details, saying there was no new marble and no special elevators, adding some controversial items were not in the current plan.
Powell’s term as Fed chairman ends in May 2026, though his term as a governor continues until January 2028. Trump administration officials have signaled he could name a potential replacement this month.
Green emphasized that Federal Reserve independence directly shapes mortgage rates for American households, borrowing costs for global corporations, pension fund health and banking system stability worldwide. Weakening that independence puts all of those at risk simultaneously.
Deutsche Bank warned in July 2025 that removing Powell could spark severe market disruption. The bank stated both the currency and bond market could collapse, citing heightened risks of inflation and financial instability.
Bank of America CEO Brian Moynihan recently stated that erosion of Fed independence would carry serious consequences. He warned the market will punish people if the US does not have an independent Fed.
