In a move that has sent shockwaves through the financial community, President Donald Trump has reportedly ordered a criminal investigation into the conduct of Federal Reserve Chair Jerome Powell. This unprecedented action has led many to question whether the United States is veering dangerously close to the characteristics of a “banana republic”.
The allegations against Powell centre around his decisions to raise interest rates in 2018 and 2019, which the President believes were politically motivated and intended to undermine his administration’s economic policies. Trump has long been a vocal critic of the Fed’s monetary policy, frequently taking to Twitter to lambast Powell and the central bank.
However, financial experts argue that the Fed’s mandate is to maintain price stability and maximum employment, not to serve the political interests of the sitting president. “The independence of the Federal Reserve is a cornerstone of American democracy,” said Dr. Emily Thornton, an economist at the London School of Economics. “Attempts to subvert that independence and turn the central bank into a political tool are deeply concerning and could have far-reaching consequences for the stability of the US economy.”
The Justice Department has yet to confirm the existence of a criminal probe, and Powell himself has not commented publicly on the matter. However, several former Fed officials have spoken out in defence of the central bank’s integrity.
“The Federal Reserve has always operated with a steadfast commitment to its dual mandate, regardless of which party controls the White House,” said Dr. Michael Barr, a former member of the Fed’s Board of Governors. “Politicizing monetary policy decisions would be a dangerous precedent that could undermine public trust in the institution and its ability to fulfil its responsibilities.”
The potential fallout from this clash between the executive branch
