Trump: Powell must be "thoroughly investigated."
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On Monday, February 2nd, U.S. President Trump made it clear during an interview in the Oval Office that the criminal investigation into Fed Chair Powell should not be stopped. Faced with Republican Senator Thom Tillis’s ultimatum—"No new chair nomination unless the investigation stops"—Trump responded directly: Washington U.S. Attorney Jeanine Pirro should continue the probe.
“Jeanine Pirro should get to the bottom of this and see what happens,” Trump emphasized to reporters present.
This stance not only escalates tensions between the White House and the Fed, but also casts a heavy political shadow over the transition of the next Fed chair. The market’s biggest concern now is that Trump’s relentless pursuit of Powell may prevent his nominee from taking office smoothly.
Just last Friday, after months of vetting, Trump announced the nomination of Kevin Warsh to succeed Powell as the next Fed chair. However, on the same day, Republican Senator Thom Tillis of North Carolina drew a “red line”: Unless the investigation into Powell is fully resolved, he will oppose any new Fed nominee.
This is a substantial risk signal for investors. Tillis is a member of the Senate Banking, Housing, and Urban Affairs Committee, which currently consists of 13 Republicans and 11 Democrats. The political math is stark: If Tillis sides with all the Democrats on the committee to oppose Warsh, this would create a 12-to-12 deadlock.
This means Warsh’s nomination could be stalled in the committee stage and not move to a full Senate vote. A leadership vacuum or uncertainty at the Fed is the last thing financial markets want to see.
Targeting the "Renovation Scandal"
The conflict between Trump and Powell appears to focus on the renovation project at the Federal Reserve’s Washington headquarters.
In his remarks on Monday, Trump used strong language to characterize the problems with this project. He said:
“This is either gross incompetence, or some form of theft, kickbacks. I don’t know what it is exactly, but Jeanine Pirro is outstanding, she’ll get to the bottom of it.”
Trump has long criticized the Fed headquarters renovation as dragging on for years and costing billions of dollars, suspecting corruption. The Fed has defended the project, saying it aims to lower the central bank’s costs in the long run and has explained the increased costs.
However, the market widely believes that this “anti-corruption” probe is a contest over monetary policy. Powell disclosed on January 11 that he was under criminal investigation and accused the administration of using it as a pressure tactic.
Powell stated that despite Trump’s pressure for sharp, fast rate cuts, the Fed has insisted on “making our rate decisions based on our best judgment of the public interest, not following the President’s preferences.” According to CNBC, as part of Pirro’s investigation, the Fed has so far failed to comply with a grand jury subpoena.
Powell’s term ends this May, and this struggle between “independence” and “reckoning” will clearly come to a head in his final months in office.
Risk disclaimerThe market involves risk, investment should be made cautiously. This article does not constitute personal investment advice, and does not take into account individual user investment targets, financial condition, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their specific situation. Investing accordingly is at your own risk. ```