A federal judge delivered a critical decision, preventing subpoenas issued by a grand jury aimed at the Federal Reserve as part of an inquiry into Chair Jerome Powell.
U.S. Attorney for the District of Columbia Jeanine Pirro quickly announced that the Department of Justice would contest what she termed the “appalling” ruling, which was unsealed on Friday.
Friday’s ruling is likely to extend Powell’s tenure as chairman since Sen. Thom Tillis, R-N.C., has pledged to obstruct Kevin Warsh‘s confirmation to replace Powell until the federal inquiry concludes.
This could result in interest rates staying elevated longer than President Donald Trump desires, as Powell has consistently resisted the president’s pressures to reduce them further.
U.S. District Judge James Boasberg, in his judgment, indicated that evidence suggested Pirro was driven to investigate Powell due to a wish to compel the Fed leader to submit to Trump and swiftly lower interest rates.
Pirro’s investigation reportedly centers on the Fed’s multibillion-dollar renovation of its Washington headquarters and Powell’s testimony before the Senate Banking Committee regarding that initiative.
“Did prosecutors initiate those subpoenas for a legitimate purpose? The Court finds that they did not,” Boasberg noted in the decision from U.S. District Court in Washington, dated Wednesday but disclosed on Friday.
“There is ample evidence that the primary (if not exclusive) intention of the subpoenas is to intimidate and pressure Powell either to conform to the President’s wishes or to step down and allow for a Fed Chair who will,” the judge expressed.
“Conversely, the Government has presented no evidence that Powell has committed any offense aside from upsetting the President,” Boasberg remarked.
Pirro condemned Boasberg’s ruling at a press conference on Friday, labeling it “outrageous.”
“Jerome Powell is now shielded from accountability,” she asserted. “This is inappropriate and lacks legal justification.”
Tillis, in a post on X on Friday, anticipated that the ruling will be upheld.
“This ruling confirms just how weak and nonsensical the criminal investigation of Chairman Powell really is, and it represents nothing but a failed attempt to undermine Fed independence,” he remarked. “We all recognize how this will conclude, and the D.C. U.S. Attorney’s Office should spare itself additional humiliation.”
The Federal Reserve declined to provide comments when approached by CNBC.
Boasberg’s decision and the DOJ’s planned appeal are expected to retain Powell in his chairmanship until after his term concludes in May.
Tillis’s promised “no” vote on the Banking Committee regarding Warsh’s nomination would create a deadlock, hindering Warsh from receiving a confirmation vote from the full Senate.
Trump’s wish for the Fed to reduce interest rates has been further complicated by the Iran conflict.
Rising energy costs are likely to deter policymakers from easing measures until clarity emerges regarding when and how the conflict will conclude.
Recent comments from Fed officials have suggested a largely cautious stance regarding further rate cuts, aside from Governors Stephen Miran and Christopher Waller, who have advocated for lower rates.
Markets have already delayed any expectations for rate reductions until the year’s end. Prior to the conflict, the market had been pricing in a minimum of two cuts.
— CNBC’s Eamon Javers and Jeff Cox contributed to this report
