1. United States
2. Maine
3. Letter

Recent developments involving the Department of Justice’s criminal subpoena threat against Federal Reserve Chair Jerome Powell represent an unprecedented risk to the Federal Reserve’s political independence. Powell has stated this action appears aimed at coercing monetary policy decisions rather than addressing genuine misconduct, threatening the ability of the Fed to set interest rates based on economic data instead of political pressure.  Why this matters: • Fed independence anchors price stability and economic credibility. When central banks are subject to political coercion, inflation tends to stay high and financial markets destabilize, as seen in countries where governments directly influence monetary policy. Historically, politically driven rate policy has correlated with worse inflation outcomes and economic instability.  • The current conflict is not abstract. Powell’s testimony on the Fed’s $2.5 billion renovation has been used as a pretext for threats of indictment after he refused to bend to political demands to cut rates.  • Market confidence is already showing stress. Financial conditions have reacted to the perception that monetary policy could be politicized.  Bipartisan concern in the Senate: Republican Senator Thom Tillis of North Carolina has publicly stated he will block all Federal Reserve nominations, including the next Fed chair, until this matter is resolved — citing deep concern about threats to Fed independence.  Democratic leaders on the Senate Banking Committee have also criticized the move as undermining the central bank’s credibility.  Congress must act. Current statutory protections are insufficient if a President or DOJ can effectively retaliate against a sitting Fed Chair for policy disagreements. To safeguard the economy against future political interference: 1 Affirm explicit legal protections for the Federal Reserve’s operational independence, including clear limits on investigations or actions tied to monetary policy decisions. 2 Hold hearings with Fed leadership, DOJ, and economic experts on the implications of weaponizing legal processes against independent policy decisions. 3 Pass legislation affirming that monetary policy decisions grounded in economic assessments are not subject to criminal or administrative retaliation. The strength of the U.S. economy depends on a credible and independent central bank. Eroding that foundation for short-term political goals risks higher inflation, weaker growth, and loss of global confidence.