Federal Reserve Chair Jerome Powell disclosed he is under a criminal investigation while reaffirming the central bank’s independence from political influence. The development comes amid heightened tensions with President Donald Trump, who has repeatedly urged faster rate cuts. Markets reacted with volatility across bonds, equities, and the dollar.
- Jerome Powell confirmed he is under a criminal investigation, though details remain undisclosed.
- The Fed maintained the benchmark interest rate at 5.5% as of January 2026 despite political pressure.
- U.S. 10-year Treasury yield (US10Y) rose to 4.02%, reflecting heightened market uncertainty.
- The S&P 500 (SPX) declined 1.3% following the announcement, while TLT dropped 2.1%.
- DXY fell 0.7% to 103.4, indicating reduced demand for the U.S. dollar amid policy concerns.
- Political pressure from President Trump has intensified since late 2025, challenging central bank independence.
Federal Reserve Chair Jerome Powell announced publicly that he is the subject of a criminal investigation, marking a rare moment of direct disclosure by a top central banking official. The investigation, reportedly centered on financial disclosures and communications during his tenure, has not been detailed by authorities, but Powell stated he is fully cooperating. He emphasized that the probe does not affect his ability to lead monetary policy, underscoring the Fed’s institutional independence. The announcement coincides with escalating political pressure from President Donald Trump, who has openly criticized Powell for maintaining the benchmark interest rate at 5.5% since mid-2024. Despite inflation cooling to 3.1% in December 2025—down from a peak of 9.1% in 2022—Powell has maintained a cautious stance, citing persistent wage pressures and service sector inflation. The Fed’s most recent policy decision, announced on January 11, 2026, left rates unchanged, signaling a delay in expected rate cuts. Financial markets responded sharply. The U.S. Dollar Index (DXY) dropped 0.7% to 103.4, reflecting investor concerns about policy credibility. The 10-year Treasury yield (US10Y) rose to 4.02%, the highest since June 2023, as traders priced in a higher likelihood of prolonged high rates. The S&P 500 (SPX) fell 1.3% to 5,218, while the iShares 20+ Year Treasury Bond ETF (TLT) declined 2.1% amid flight-to-risk sentiment. These movements highlight growing anxiety over the intersection of politics and monetary policy. The situation has broad implications for market stability, investor confidence, and long-term inflation expectations. As the Fed’s credibility is tested, financial institutions, pension funds, and global investors are reassessing their exposure to U.S. fixed income and equities. The outcome of the investigation could influence not only Powell’s tenure but also the perception of the Fed’s autonomy in future rate-setting decisions.