Jerome Powell under investigation as tensions between Trump and the Fed escalate

Tensions between Trump and the Fed: the investigation into Powell

From a medium- to long-term perspective, Powell’s leadership is viewed positively. He took office in 2019 and, just one year later, had to confront the impact of the pandemic. In that context, the Fed implemented an ultra-expansionary monetary policy, cutting rates to historic lows and launching direct stimulus programs to support consumption, known as “Helicopter Money,” aimed at sustaining economic activity and employment in an economy where two-thirds of growth depends on consumer spending.

This strategy helped prevent an economic collapse but later led to significant inflationary imbalances. In 2022, inflation in the United States peaked at 9.1%. After acknowledging that inflation was not transitory, the Fed implemented the most aggressive monetary tightening cycle since the 1980s. The result was a slowdown in inflation to the current level of 2.7%, without triggering a recession.

While the labor market shows signs of cooling, it remains stable. The unemployment rate stands at 4.4%, close to full employment, though above the previous low of 3.3%. The economy continues to grow, consumption remains solid, and there is no evidence of structural job losses.

The investigation into Powell has sparked global alarm over the potential threat to the independence of the U.S. central bank. Figures such as Christine Lagarde (European Central Bank), Andrew Bailey (Bank of England), and monetary authorities from Brazil, Switzerland, Sweden, Denmark, South Korea, Australia, and Canada issued a joint statement in defense of the Fed. Former Fed Chairs Janet Yellen, Alan Greenspan, and Ben Bernanke also voiced their support, warning that political interference in monetary policy is unacceptable in a developed economy.