Three former heads of the US central bank on Monday strongly criticised a criminal investigation into chair Jerome Powell, describing it as a bid to undermine the Federal Reserve's independence.
In a statement, Janet Yellen, Ben Bernanke, and Alan Greenspan, along with ten other eminent former officials, rallied behind Powell.
This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly, the former officials wrote.
It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success, they added.
The move by the Department of Justice (DoJ) comes after a year of relentless attacks on Powell by US President Donald Trump.
Trump has not only criticised Powell's decisions on interest rates but has also launched a series of personal attacks, labeling him a major loser and numbskull. The president stated that he was unaware of the investigation, which was disclosed by Powell in an unscheduled video statement.
In his remarks, Powell described the investigation as unprecedented and suggested that it stemmed from Trump's frustration with the Fed's monetary policy not aligning with his desires.
Powell commented, This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. Those are pretexts.
The investigation's backdrop includes the Fed lowering its key lending rate three times in the second half of 2025, spurring Trump's ongoing dissatisfaction with the pace of cuts.
Former Fed Chair Yellen remarked that the investigation was extremely chilling and suggested that it could cause concern among investors regarding the Fed's independence.
Senator Thom Tillis, a Republican member of the Senate Banking Committee, has stated he would oppose any nomination to replace Powell until the investigation is fully resolved, highlighting bipartisan concerns regarding the impact of the DoJ probe on the central bank's operations.
As the situation unfolds, market reactions have been muted thus far, but analysts warn that the implications of Trump's influence on Fed policy could engender increased volatility ahead.
