If you missed it yesterday, here’s a video of Jerome Powell revealing that the Department of Justice has served the Federal Reserve with grand jury subpoenas:
Significantly, Fed chair Powell insisted this was a political move, saying:
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.
Fiona Cincotta, senior market analyst at City Index, says ongoing concerns about Federal Reserve independence have put pressure on the dollar this week.
Cincotta explains:
The U.S. dollar has come under pressure this week, falling sharply yesterday on reports that the U.S. Department of Justice is considering indicting Federal Reserve Chair Jerome Powell over a building renovation project at the Federal Reserve headquarters.
Powell said he considered the threat a pretext to pressure the Fed to lower interest rates. His comments raised concerns about the Federal Reserve’s independence and exerted downward pressure on the U.S. dollar.
The next US inflation report, due at 1.30pm UK time (8.30am EST) today, could also move the dollar, she adds:
Attention will now turn to the US CPI report for further clarity over the Fed’s next move. CPI is expected to hold steady at 2.7% in December, while core CPI is expected to rise to 2.7%, up from 2.6%. Given data-collection issues in the November reading, the US CPI for December could come in hotter than expected.
The market is currently pricing in two rate cuts from the Fed compared to one rate cut guided by the US central bank. Higher-than-expected inflation could prompt the market to rein in expectations for rate cuts, which would boost the US dollar.
Although the US dollar fell yesterday, the news that America’s top central banker was under criminal investigation (a real marmalade dropper) hasn’t caused many serious ructions in the markets.
Yet.
Dario Perkins, MD for global macro at City consultancy TS Lombard, has warned that the independence of central banks shouldn’t be taken for granted, in an age of populism.
Perkins wrote this morning:
The short answer is that the market probably won’t react to Trump’s blatant politicization of the Fed until the economy rebounds and/or inflation returns to the top of investors’ minds.
There are various scenarios where this stuff just won’t matter. But longer term, we shouldn’t take the independence of central banks for granted.
They were a child of post-1990s Neoliberalism – and an obvious target for populists all over the world. Populism and monetary independence don’t mix.
Full story: Global central banks offer ‘full solidarity’ to US Fed’s Powell amid Trump threats
Global central banks have issued an extraordinary joint statement offering “full solidarity” to US Federal Reserve chair Jerome Powell, in the face of the latest threat to his independence from Donald Trump’s White House.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability,” the statement said.
Economists have warned this week that Donald Trump’s attempts to influence the US Federal Reserve could risk plunging America into a period of 1970s-style inflation and trigger a global backlash in financial markets.
Analysts drew parallels with the 1970s when US inflation soared after the then president, Richard Nixon, pressured the then Fed chair, Arthur Burns, to ease monetary policy to help smooth his 1972 election campaign.
Atakan Bakiskan, US economist at Berenberg bank, said:
“If the Fed pursues an ultra-accommodative monetary policy despite higher inflation, the result could resemble the 1970s in a worst-case risk scenario.
“Moreover, if the Fed acts on politics rather than data, foreign investors could pull back on financing the US debt and seek new safe havens.”
Why Federal Reserve attacks worry the markets
The key worry for central bankers, generally, is that inflation expectations shouldn’t get out of control.
That’s why Donald Trump’s criticism of Jerome Powell over many months could be dangerous – investors could conclude that Powell’s successor will be influenced by the whims of the White House, and cut interest rates too much, letting inflation rear out of control.
Susannah Streeter, chief investment strategist at Wealth Club, explains:
The big worry is that if the Fed is bowed to do the President’s bidding, there will no longer be a razor-sharp focus on ensuring inflation does not veer out of control. Today’s core inflation numbers for December in the US will be under intense scrutiny.
There are already signs of persistent inflationary pressure, with the data expected to show a slight tick up in price rises to an annual rate of 2.7% from 2.6% in November, veering further away from target. If it overshoots expectations, it could dampen enthusiasm for equities given that further interest rate cuts could be delayed. But it seems in Trump’s wishful world, the Fed would keep lowering borrowing costs despite runaway inflation risks, which is why there’s so much unease around about US future monetary policy.'’
International central bankers back Fed's Powell over DoJ investigation
Newsflash: Eleven of the world’s top central bankers have released a statement of support for Federal Reserve chair Jerome Powell, after the US Department of Justice opened a criminal investigation into him.
In an unprecedented move, top central bank chiefs including the Bank of England’s Andrew Bailey, and Christine Lagarde of the European Central Bank, have backed Powell, and warned against undermining central bank independence.
The heads of the Swedish, Denmark, Swiss, Australian, Canadian, South Korean, and Brazilian central banks have also signed, as have two top officials at the Bank of International Settlements (known as the “central bank for central banks”).
Othes may yet sign the letter too, Reuters suggested this morning.
The central bank chiefs say:
We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell.
The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.
Chair Powell has served with integrity, focused on his mandate and an unwavering commitment to the public interest. To us, he is a respected colleague who is held in the highest regard by all who have worked with him.
The letter is signed by:
Christine Lagarde, President of the European Central Bank on behalf of the ECB Governing Council
Andrew Bailey, Governor of the Bank of England
Erik Thedéen, Governor of Sveriges Riksbank
Christian Kettel Thomsen, Chairman of the Board of Governors of the Danmarks Nationalbank
Martin Schlegel, Chairman of the Governing Board of the Swiss National Bank
Michele Bullock, Governor of the Reserve Bank of Australia
Tiff Macklem, Governor of the Bank of Canada
Chang Yong Rhee, Governor of the Bank of Korea
Gabriel Galípolo, Governor of the Banco Central do Brasil
François Villeroy de Galhau, Chair of the Board of Directors of the Bank for International Settlements
Pablo Hernández de Cos, General Manager of the Bank for International Settlements
UPDATE: Here’s the full story on today’s letter.
This is the second show of support for Powell in two days, after his predecessors at the Fed also backed him:
Updated
China 'firmly opposes' Trump's Iran tariffs threat
China has criticised Donald Trump’s threat of new 25% tariffs on companies doing business with Iran.
Liu Pengyu, the spokesperson for the Chinese Embassy in the US, said China’s position against the “indiscriminate imposition of tariffs is consistent and clear”, adding:
Tariff wars and trade wars have no winners, and coercion and pressure cannot solve problems. Protectionism harms the interests of all parties.
China firmly opposes any illicit unilateral sanctions and long-arm jurisdiction, and will take all necessary measures to safeguard its legitimate rights and interests.
Overnight, the United States attorney for the District of Columbia defended her decision to issue the Federal Reserve with subpoenas last week.
Jeanine Pirro posted on X that the Fed had ignored previous contact over its renovation project, writing:
The United States Attorney’s Office contacted the Federal Reserve on multiple occasions to discuss cost overruns and the chairman’s congressional testimony, but were ignored, necessitating the use of legal process—which is not a threat.
The word “indictment” has come out of Mr. Powell’s mouth, no one else’s. None of this would have happened if they had just responded to our outreach.
This office makes decisions based on the merits, nothing more and nothing less. We agree with the chairman of the Federal Reserve that no one is above the law, and that is why we expect his full cooperation.
The United States Attorney’s Office contacted the Federal Reserve on multiple occasions to discuss cost overruns and the chairman’s congressional testimony, but were ignored, necessitating the use of legal process—which is not a threat.
— US Attorney Pirro (@USAttyPirro) January 13, 2026
The word “indictment” has come out of Mr.…
Reuters: Global central bank chiefs plan statement of support for Fed's Powell
Global central bank officials are reportedly planning to release a coordinated statement of support for US Federal Reserve Chair Jerome Powell, after America’s top central banker was threatened with a criminal indictment.
Reuters is reporting that the statement, which is expected to contain the signatures of central bankers from around the world, will back Powell and stress the need for independent central banking.
It comes after Sunday night’s bombshell news that the US Department of Justice has opened a criminal investigation into Jerome Powell and the Federal Reserve, over renovations to the Fed’s historic office buildings in Washington DC.
The move has been widely seen as an attack by the Trump White House on the independence of the Federal Reserve.
Yesterday, former Fed chairs Alan Greenspan, Ben Bernanke and Janet Yellen all condemned the “unprecedented” attempt by the Trump administration to weaken the US central bank’s independence, and warned that similar prosecutorial attacks in other countries had led to “highly negative consequences” for the cost of living.
Trump has long criticised Powell for not cutting interest rates faster; the danger is that investors conclude that future Fed decisions will be dictated by political considerations, not what’s best for monetary policy.
Bank of England governor Andrew Bailey has offered support to Powell in the past; last summer, he called the Fed chair “a man of utmost integrity.”
Last April, European Central Bank president Christine Lagarde said she had “enormous respect” for Powell, explaining:
“I am reassured by the talent and the competence of the chair of the Fed.
And I know for a fact that he’s putting all his efforts and all his discipline into delivering on his mission.”
Yesterday, several Republican lawmakers began speaking out against the Trump administration’s criminal investigation into Powell, and Democratic Senator Elizabeth Warren warned that Trump’s attempts to control the Federal Reserve “undermines America all around the world”.
Updated
Warhammer maker Games Workshop is paying out a fresh dividend to investors, after first-half sales and profits rose beyond expectations despite a hit from US tariffs.
The Nottingham-based company, which makes tabletop miniatures and games, has enjoyed booming sales, including from video game licensing income, and is building its fourth factory in the UK.
It said today it will pay a dividend of £1.10 a share, taking dividends declared so far in 2025/26 to £4.85 a share.
Set up five decades ago by three school friends in Shepherd’s Bush, Games Workshop has grown into a FTSE 100 company worth more than £6bn.
It had said tariffs imposed by Donald Trump last spring could impact profit before tax by £12m in 2025/26. It incurred £6m due to the tariffs in the six months to 30 November, but the impact on its gross profit margin has been more than offset by efficiencies, price rises of 3.5% on its fantasy miniature figures and books, more stable commodity prices and lower stock write offs.
Core revenues, excluding licensing, rose by 17% to £316.1m and total sales were £334.7m at constant currency, up 11%. Profit before tax climbed by 11% to £140.8m, better than expected.
The company, which has 570 stores, including 134 in the UK, 201 in North America and 167 in continental Europe, said it would open a cafe Warhammer World store on the US east coast in 2027. It makes all of its miniatures in the UK, and plans another warehouse in the UK.
Games Workshop is working with Amazon MGM Studios, actor Henry Cavill and production company Vertigo on live action projects, which will take several years.
It signed up with Amazon just over a year ago to adapt its Warhammer 40,000 brand into films and television series, and work is almost complete on a Warhammer Age of Sigmar episode for its Prime Video.
Even so, Games Workshop’s shares fell by over 3% this morning – but are up 38.5% over the past year.
Updated
EU urges Musk to fix Grok quickly
The EU has warned Elon Musk’s X to urgently “fix” the “horrendous” AI tool allowing users to “undress” women and children or face urgent action.
The blunt warning comes as the European Commission extended a retention order sent to Elon Musk’s X last year to retain and preserve all internal documents and data related to xAI chatbot Grok until the end of 2026, amid a global outcry over Grok-generated “undressed” images.
The EU tech commissioner Henna Virkunnen said last night:
“X now has to fix its AI tool in the EU, and they have to do it quickly.
“If not, we will not hesitate to put the DSA to its full use to protect EU citizens”
“X offering the use of Grok to create and share pictures of undressed women and children is horrendous,” she added in a post on X.
Governments and regulators from Europe to Asia are cracking down on sexually explicit content generated by Grok on X, launching probes, imposing bans and demanding safeguards, in a growing global push to curb illegal material.
The British prime minister has warned that X could lose its right to self regulate if Musk’s platform keeps creating sexual images.
Malaysia’s communications regulator said on Tuesday it will take legal action against social media platform X due to concerns over user safety in relation to Grok.
UK minicomputer-maker Raspberry Pi is suffering from the AI industry’s rapacious appetite for memory chips.
Raspberry Pi told shareholders this morning that volatility in the supply and price of memory was clouding its outlook beyond the first half of this year.
It says:
As has been widely reported, the cost of the LPDDR4 DRAM used in many Raspberry Pi products has increased rapidly in recent months, with some major suppliers now indicating limitations of supply at high densities. This trend has largely been driven by memory vendors diverting manufacturing capacity to meet the surge in AI data centre investment.
Raspberry Pi is taking steps to mitigate this problem, including approving new suppliers, developing products that use less memory, and raising its prices.
Shares in the Cambridge-based company have dropped by over 6% this morning, the worst performer on the FTSE 250 index.
From oil to wind power…. and shares of Danish renewables giant Orsted have jumped over 5% this morning, after a US judge gave it clearance to resume work on a project off the coast of Rhode Island.
The ruling by US district judge Royce Lamberth is a legal setback for Trump, who has sought to block expansion of offshore wind in federal waters.
It means Orsted can complete its nearly finished Revolution Wind project, which could begin generating power this year.
In the City, hotel operator Whitbread has jumped to the top of the FTSE 100’s top risers table this morning, after predicting a smaller hit from UK property taxes.
Whitbread told shareholders this morning that it now expects business rate hikes announced in the autumn budget to cost it around £35m in the next financial year.
That’s an improvement on its previous estimate, that the budget would cost it between £40m and £50m.
Whitbread’s shares are up 4% this morning.
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“Whitbread, owner of Premier Inn, posited a solid trading update this morning. Its UK revenue per available room (RevPAR) came in better than expected with an increase of 2.5% in Q3 and showing another sequential improvement quarter-on-quarter.
The company’s current trading remains strong, with RevPAR accelerating to 4% in the first six weeks of Q4. This was driven predominantly by London where it grew 7% and Regions up 0.9%, with pricing having the biggest impact in both areas.
Volkswagen sales hit by US tariffs
Automobile manufacturer Volkswagen has reported that its sales in the US fell last year, due to Donald Trump’s tariffs.
In 2025, Volkswagen’s global sales fell by 1.4%, which it blames on “challenging market conditions”.
Volkswagen grew its sales in Europe by 5.1%, and by 18.5% in South America.
But sales fell by 8.2% in the US, with VW warning that “US tariffs also had a marked impact on deliveries in North America”.
Demand also weakened in China, where VW’s sales fell 8.4%.
Martin Sander, Volkswagen board member for sales, marketing and after sales, says:
“The trend in our delivery figures underscores that our products are being well received by our customers and also that we are on the right track with our brand strategy. We expect the market environment to remain challenging overall in 2026.
All the same, I firmly believe that thanks to our refreshed, attractive product portfolio and our clear focus on efficiency and competitiveness we are very well equipped to rise to this challenge. In China alone, we will be bringing out more than ten new electric models this year.”
US crude oil is also climbing this morning.
US West Texas Intermediate crude rose to $60/barrel this morning, for the first time in over a month.
ING commodities strategists said today:
“The price increase comes amid intensifying protests in Iran, raising the possibility of some form of intervention by the U.S.”
Trump: WE’RE SCREWED if we lose supreme court tariff case
Speaking of tariffs…. Donald Trump has also claimed that the US would be “screwed” if the supreme court does not uphold his trade levies.
In a post last night, Trump claimed the US would have to repay “many Hundreds of Billions of Dollars” if the US highest court rules against the White House, plus the “payback” which companies building factories in America to avoid tariffs would – he argues - demand.
Trump wrote:
When these Investments are added, we are talking about Trillions of Dollars! It would be a complete mess, and almost impossible for our Country to pay. Anybody who says that it can be quickly and easily done would be making a false, inaccurate, or totally misunderstood answer to this very large and complex question.
In a dramatic twist, Trump concluded:
Remember, when America shines brightly, the World shines brightly. In other words, if the Supreme Court rules against the United States of America on this National Security bonanza, WE’RE SCREWED!
[Reminder: tariffs are paid by US companies when they import goods]
The Supreme Court could rule as soon as tomorrow on Trump’s tariffs. Last November, they expressed some scepticism of the legal basis of the Trump administration’s sweeping global tariff regime, pointing out that Congress is in charge of taxes.
Introduction: Oil hits two-month high as Trump says countries doing business with Iran face 25% tariff
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Oil has hit its highest level in almost two months this morning, after Donald Trump theatened new tariffs on any country doing business with Iran.
In a post on Truth Social on Monday, the US president declared:
Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America. This Order is final and conclusive. Thank you for your attention to this matter!
Top export destinations for Iranian goods include China, the United Arab Emirates and India, so this could reignite Trump’s smouldering trade war.
The threat came as Iranian auhorities crack down on nationwide protests; as of this morning, at least 648 people have been killed by Iran’s security services and more than 10,600 have been arrested.
Iran is one of the biggest producers of the Organization of the Petroleum Exporting Countries, so any escalation could disrupt oil supply or add a geopolitical risk premium.
Brent crude has climbed to $64.46 a barrel this morning, its highest level since 19 November.
A week ago Brent fell below $60/barrel, when investors were pondering the prospect of increased crude supply from Venezuela.
Analysts at Barclays have calculated that the unrest in Iran has added about $3-4/barrel in geopolitical risk premium in oil prices.
The agenda
10am GMT: Lords Industry and Regulators Committee to examine relationship between regulators and economic growth
1.30pm GMT: US inflation report for December
2.30pm GMT: World Bank updated economic forecasts published - 14.30 embargo, online presser 13.30 - p26 growth forecasts - World economy downgraded from 2.7% forecast growth to 2.4% this year, with US downgraded from 2% to 1.6%
3pm GMT: Richard Hughes, former chair of the UK’s Office for Budget Responsibility, to appears before House of Lords economic affairs committee
