Goldman Sachs: Threat of Criminal Charges Against Powell Heightens Concerns Over Federal Reserve Independence
The threat of criminal prosecution against the Chairman of the U.S. Federal Reserve, Jerome Powell, has sparked a wave of concern in economic and financial circles regarding the central bank’s independence, amid escalating tensions between the U.S. administration and the Federal Reserve over the course of monetary policy.
Goldman Sachs’ Perspective
Jan Hatzius, Chief Economist at Goldman Sachs, noted that the looming possibility of a criminal indictment for the Fed Chair could deepen existing concerns about central bank independence, emphasizing that these worries have become increasingly apparent in recent weeks.
Hatzius explained that the criminal investigation involving Powell has heightened the perception of potential political pressures on the Fed. However, he stressed his full confidence that Powell will continue to make decisions based on economic data, without being influenced by political pressures to either lower interest rates further or refrain from doing so.
Background of the Criminal Investigation
Jerome Powell received subpoenas from a grand jury issued by the U.S. Department of Justice related to his testimony before Congress last June regarding the Federal Reserve headquarters renewal project, which is estimated to cost $2.5 billion. Powell described the move as a serious escalation in a series of ongoing attacks on the central bank’s independence.
Tensions with the Trump Administration
These developments come amid a tense relationship between Powell and U.S. President Donald Trump, who has criticized the Federal Reserve’s policies on multiple occasions, openly expressing dissatisfaction with the pace and magnitude of interest rate cuts since taking office in January 2025. Trump has also openly stated his desire to remove Powell from office at the end of his term in May, a move that has sparked widespread debate over the institutional norms that protect central bank independence.
Potential Implications
Observers believe that continued political pressure and criminal investigations could negatively affect the Fed’s image as an independent institution, which may, in turn, impact market confidence in U.S. monetary policy, even if policymakers remain committed to a data-driven approach.
Goldman Sachs’ warnings reflect growing concern in global financial circles about the erosion of Federal Reserve independence at a sensitive time, with significant economic and monetary challenges, highlighting the importance of maintaining central bank independence to ensure market and economic stability.
