Goldman Sachs’ chief economist Jan Hatzius has warned this morning that the criminal indictment threat facing Federal Reserve chairman Jerome Powell has reinforced worries that central bank independence is being undermined.

Reuters reports that Hatzius told a 2026 Goldman Sachs Global Strategy Conference:

“Obviously there are more concerns that Fed independence is going to be under the gun, with the latest news on the criminal investigation into Chair Powell really having reinforced those concerns.”

Hatzius added, though, that he expected the Fed to continue to make decisions based on data:

“I have no doubt that he (Powell) in his remaining term as chair is going to make decisions based on the economic data and not be influenced one way or the other, cutting more or refusing to cut on the back of data that could push in that direction.”

The battle to succeed Jerome Powell as chair of the Federal Reserve is a two-horse race, according to betting on predictions site Polymarket, with both horses called Kevin.

Kevin Hassett, the director of Donald Trump’s National Economic Council, is leading the betting at 43% this morning.

Close behind is Kevin Warsh, a former member of the Fed’s board of governors, at 41%.

Current board member Christopher Waller is running third, at 8%, followed by BlackRock executive Rick Rieder at 3%.

Trump has suggested he could name his pick this month; Powell’s term ends in May.

The news that Jerome Powell is facing a criminal investigation is “shocking”, professor Costas Milas of the University of Liverpool’s management school tells us.

He explains:

Jerome Powell will definitely regret he is not living in ancient Roman times where interest rates were remarkably stable as they were set at a fixed value to reflect the local system of numerical fractions. The criminal charges against Fed Chair Jerome Powell will most likely make financial markets realise that Fed independence is under huge pressure.

As I recently noted in a blog for LSE Business Review, if financial markets lose confidence in the Fed, Fed, in turn, will lose its ability to tackle future financial crises. Not a good economic start for 2026...

The US stock market is set to open lower as investors react to the news that Federal Reserve Chair Jerome Powell said the Trump administration has threatened him with a criminal indictment.

A futures contract tracking the S&P 500 share index is down 0.75%, while Dow Jones Industrial Average futures are down 0.65%. Nasdaq 100 futures are down just over 1%.

Chris Beauchamp, chief market analyst at IG, says:

“The spat between Trump and Powell had been quiet of late, at least publicly, but the infighting has stepped up a gear following the DoJ’s investigation of the Fed. Gold has surged to a new high on the news, while US futures are weaker. This certainly wasn’t on our bingo card for 2026, but it represents a major crisis for markets and has the potential to restart worries about the dollar and US monetary policy. Earnings season might knock this story off the front page for a while, but it will now rumble along in the background.”

UK business secretary Peter Kyle has hinted the government will make an announcement for the hospitality industry “in the coming days”, amid growing pressure from pubs, restaurants, shops and hotels to reverse an impending rise in business rates.

He told BBC Breakfast this morning:

“We have been in listening mode for quite some time now...I’ve been up in Birmingham meeting the hospitality sector, I’ve been meeting people who are running pubs right the way through, as recently as just last week.

And I think that we will be talking about this a bit more in the coming days.”

He added he would be prepared to talk further on the challenges facing the hospitality industry “when we have spoken a bit more about what we will be doing in future to make sure we have a thriving pub and hospitality sector”.

It comes as chancellor Rachel Reeves faces pressure to U-turn on a Budget announcement to scale back business rate discounts over the next three years. Government sources confirmed last week that Reeves was preparing a support package that would include reductions to business rates for pubs.

Shares in Dutch brewer Heineken have dropped by 2.4% in early trading after it announced the departure of its CEO.

Dolf van den Brink will step down on 31 May; back in October, Heineken warned that profits this year will be lower than expected due to weaker growth in Europe and the Americas.

European stock markets have fallen at the start of trading, as investors ponder the criminal investigation into America’s top central banker.

In London, the FTSE 100 share index is down 18 points, or almost 0.2%, at 10,106 points, having ended last week at a new closing high.

France’s CAC is down 0.2%, while Germany’s DAX is flat.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:

“Global markets opened on the back foot this morning, with the FTSE 100 edging lower, alongside softer European markets and US futures pointing to a muted Wall Street open later today as investors grapple with fresh political turbulence and rising geopolitical risk.

Sentiment has been shaken by news of a criminal probe into Fed Chair Jerome Powell and his claims of political pressure from the Trump administration, while unrest in Iran and talk of possible US intervention add another layer of concern.

In the UK property sector, a higher proportion of homes in London were sold at a loss than any other region in England and Wales last year.

Estate agency Hamptons has reported that nearly 15% of London sellers sold for less in 2025 than they originally paid, almost double the national average of 8.7%.

London takes this unwanted title off the North East of England, where in nine of the last 10 years, sellers were most likely to make a loss.

Hamptons also reports:

• Last year, the average homeowner in England & Wales sold for £91,260 more than they paid, a value increase of 41.0% over an average holding period of 9.0 years. This is £570 less than the 2024 average of £91,830.

• Stronger recent price growth in Northern regions has boosted returns, meaning many sellers in the North of England achieved proportionally higher gains than those in much of the South.

• Flat sellers were four times more likely to make a loss than house sellers in England & Wales (19.9% vs 4.5%).

The inquiry into Powell “is a low point in Trump’s presidency and a low point in the history of central banking in America,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania.

Conti-Brown added (via Reuters)

“Congress did not design the Fed to reflect the president’s daily fluctuations, and because the Fed has rebuffed President Trump’s efforts to take the Fed down he is launching the full weight of American criminal law against its Chair.”

The criminal investigation into Jerome Powell had had an immediate fallout.

Republican Senator Thom Tillis, a member of the Senate Banking Committee that vets Presidential nominees for the Fed, has vowed to oppose any Trump nominees, including the coming choice of successor to Powell as chair, “until this legal matter is fully resolved.”

Tillis warned that the threatened indictment puts the Department of Justice’s “independence and credibility” in question.

Posting on X, Tillis warns:

If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none.

Gold has hit a new high around $4.600 an ounce; it’s up over 1.5% today, pushed up by the weaker dollar.

The US dollar has dropped on the foreign exchange markets since news of the investigation into Powell hit the wires.

The dollar index, which tracks the greenback against a basket of currencies, is down 0.2% this morning.

This is lifting sterling; the pound has gained almost half a cent against the dollar to $1.3440.

The dollar’s weakness highlights concerns that Fed independence is at risk:

Ipek Ozkardeskaya, senior analyst at Swissquote, says:

Powell highlighted that the key issue is whether the Fed can continue setting interest rates based on economic data and evidence, or whether monetary policy will be directed by political pressure.

I’m afraid we may be moving toward the second scenario. If the Fed becomes a political tool, with its chair replaced by a government puppet, that could further weaken appetite for the U.S. dollar and U.S. bonds.

Here’s the statement issued by Jerome Powell, in a video address, last night:

Good evening.

On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.

I have deep respect for the rule of law and for accountability in our democracy. No one—certainly not the chair of the Federal Reserve—is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.

This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.

This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.

I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.

Thank you.

Gita Gopinath, former First Deputy Managing Director at the IMF, has applauded the statement…

… as has Jason Furman, former chair of the US Council of Economic Advisers:

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The independence and credibility of America’s central bank is under threat after the Department of Justice opened a criminal investigation into Federal Reserve chair Jerome Powell, knocking the US dollar.

In a startling development, US prosecutors have launched a criminal investigation into Powell over a $2.5bn renovation of the Federal Reserve’s headquarters, and into his testimony about the project to the Senate banking committee in June last year.

The move is a dramatic escalation in the long-simmering tensions between the Fed and the Trump White House, with the US president repeatedly rubbishing Powell for not cutting interest rates more quickly.

After news of the investigation broke last night, Powell came out fighting, insisting that he had been threatened with criminal charges because the Fed had set interest rates “based on our best assessment of what will serve the public, rather than following the preferences of the president”.

Powell’s term as chair expires in May, and Trump was already expected to appoint a more malleable successor who might lower borrowing costs.

The news that Powell is under criminal investigation has only heightened concerns that his successor could set policy for political, not monetary, reasons.

Michael Brown, senior research strategist at brokerage Pepperstone, warns that institutional confidence in the US is again called into question.

In a classic Trumpian distraction and bullying tactic, the President has upped the ante in his long-running feud with Fed Chair Powell, after the DoJ sent subpoenas to the Fed, ostensibly in relation to Powell’s testimony on renovations to the Eccles Building last year.

Let’s call a spade a spade though. This is nothing to do with building renovations, even if it would be quite ironic for a serial bankrupt property developer to try and pursue that path. Instead, it’s Trump acting like little more than a petulant child, throwing a strop yet again because he hasn’t got his own way, in this instance lower interest rates. This isn’t a construction case, but one that strikes at the very heart of Fed policy independence.