On January 11, Fed Chair Jerome Powell issued a rare video statement, accusing the U.S. Department of Justice (DOJ) of threatening him with criminal charges to force the Fed into complying with Trump's interest rate demands. The incident quickly became a global financial market focus, sparking widespread concern over Fed independence.
DOJ Investigation and Rate Conflict
Powell said the threats were a 'consequence' of the Fed setting rates based on public interest rather than presidential preference, calling it a naked attack on central bank autonomy. The trigger was a $250 million renovation project at the Fed's Washington headquarters, which faced cost overruns and transparency issues. In July 2025, Republican Rep. Anna Paulina Luna accused Powell of giving false testimony. On January 11, 2026, the U.S. Attorney's Office in D.C. opened a criminal probe into Powell, with a grand jury issuing subpoenas. Powell directly linked the matter to rate policy, calling the DOJ's action 'unprecedented' and aimed at coercing rate cuts.
Following the news, U.S. stock index futures fell, with the S&P 500 futures dropping over 0.5% and Dow futures sliding 150 points in Asian hours. Spot gold rose 1.88%, spot silver surged about 4%, and BTC remained near $91,000. Polymarket data showed a 96% probability that the Fed would hold rates steady in January.
Trump's Longstanding Dissatisfaction with Powell's Slow Rate Cuts
Trump has long criticized Powell for being 'slow' on rate cuts, especially during his 2024 election campaign. After returning to the White House, he quickly targeted the Fed. Powell, appointed by Trump in 2018 and reappointed in 2022, has a term ending May 2026. His data-driven, gradual approach clashes with Trump's desire for lower rates. On January 12, Trump said he knew 'nothing' about the DOJ probe but again attacked Powell's performance on both the Fed and the renovation project.
Hassett and Warsh Emerge as Top Successor Candidates
The investigation was authorized by newly appointed U.S. Attorney Jeanine Pirro, a staunch Trump ally, deepening concerns over political interference. Powell said he would cooperate fully but not let it affect monetary policy. Analysts predict that if the probe escalates, the Fed might be forced to cut rates sooner, risking a rebound in inflation. Powell personally faces potential resignation or even imprisonment, though legal experts consider the evidence weak. Polymarket data shows Kevin Warsh and Kevin Hassett as the top candidates for next Fed chair, with probabilities of 43% and 39%. Warsh, a former Fed governor known for a hawkish stance, and Hassett, director of the National Economic Council and a low-rate supporter, are the leading contenders.