U.S. equity futures tumbled Sunday night. Teh reason? Federal Reserve Chair Jerome Powell revealed he’s under inquiry regarding his testimony last June about Federal Reserve building renovations.
The New York Times reported the investigation, and Powell’s disclosure quickly rattled markets. It revived fears that former President Donald Trump’s years of pressure on the Federal Reserve could escalate into a direct attack on its independence.
Nasdaq 100 futures led the decline, falling around 0.8%. Tech stocks, sensitive too interest rates, felt the biggest hit.S&P 500 futures were down about 0.5%, and Dow Jones Industrial Average futures dropped roughly 0.4%, as of late evening.
Investors turned to safe-haven assets. Gold futures jumped 1.7% to around $4,578 an ounce, and silver rose over 4%. This shows renewed demand for protection against political and monetary instability. The U.S. dollar weakened slightly against the Swiss franc and japanese yen.
Powell had largely remained silent while Trump repeatedly mocked and threatened him. But now, he appears to have reached a breaking point, issuing a rare, strong statement.
He wrote that while “No one—certainly not the chair of the Federal Reserve—is above the law,” the attack comes within “the broader context of the management’s threats and ongoing pressure.”
“This isn’t about my testimony last June or the building renovations…those are just excuses. The threat of criminal charges stems from the Federal Reserve setting interest rates based on what’s best for the public, not the President’s preferences.”
Economists caution that if the executive branch controls the fed, it could create a “self-fulfilling prophecy” of higher inflation.
Oxford Economics recently noted that any “cracks in the Fed’s independence” could quickly spread through markets and increase borrowing costs for businesses the administration wants to help with low rates.
Back in July, when Trump threatened to fire Powell, Deutsche Bank warned such a move could cause major market disruption.
“The currency and bond markets could collapse,” the bank said, citing increased risks of inflation and financial instability. “There’s clear evidence on what happens when a central bank loses its independence.”
Wall Street executives share these concerns. Brian Moynihan, CEO of Bank of America, recently said that eroding the Fed’s independence would have serious consequences.
“The market will punish us if we don’t have an self-reliant Fed,” Moynihan stated.
