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The policy dysfunction that grips Washington hit a new low this weekend when the Justice Department launched a probe of Fed Chairman Jerome Powell.
This stunning development drove futures prices lower, as foreign investors worried that the Fed’s independence once again is jeopardized.
After months of silence, Powell erupted this weekend, accusing Trump of polarizing the central bank and attempting to intimidate the Fed while ignoring evidence and economic conditions.
Trump clearly wants a lower fed funds rate, but most experts think the economy doesn’t need more medicine when the Fed meets later this month.
Trump seemingly wants to control all policy, from Greenland to the White House East Wing to the funds rate.
After a solid beginning in 2026 for the stock market, concern is growing that Trump wants too much power. In an effort to strong-arm the Fed, the Justice department has a foil — the renovation of the Fed’s new headquarters, which is way over budget.
Will a criminal probe of the Fed have any impact on monetary policy? No way. Powell may become even more assertive — he’s determined, and finally outspoken, against Trump’s bullying.
The main issue is whether the markets sense that the Fed is losing its independence — a serious threat, like playing with fire.
Related: The Impact of Trump’s Personality on Power, Policy, and Outcomes