Fed independence faces scrutiny after DOJ probe, investors say

The Justice Department served subpoenas tied to Federal Reserve building renovations and Chair Jerome Powell publicly called the action a pretext to pressure the Fed; markets showed modest reactions including a softer dollar and higher gold.

A Justice Department investigation has prompted subpoenas to the Federal Reserve that relate to a building renovation, and Chair Jerome Powell has publicly pushed back, calling the action a pretext to influence rate decisions. Investors and former officials have voiced concern that the dispute touches the Fed's political independence. Market moves were modest but noticeable, with the dollar easing and gold rising. Powell's term as chair is due to end in May, and the episode is shaping discussion about the Fed's future. Key developments: - The U.S. Department of Justice served subpoenas related to Federal Reserve building renovations that were reported to include material potentially exposing Chair Jerome Powell to criminal scrutiny. - Powell said the subpoenas were a "pretext" aimed at pressuring the Fed to cut interest rates faster. - Markets registered modest reactions, with the dollar easing, gold rising, and U.S. stock futures slipping. - Former Fed chairs and economists publicly warned about risks to the Fed's independence, and Powell's chair term is set to expire in May. Summary: The episode has heightened investor concern about the Federal Reserve's political independence and prompted small but notable market moves. What legal or procedural steps will follow beyond the subpoenas is undetermined at this time. Powell's remaining role through May will be a factor as the Fed prepares for any leadership transition.