In a dramatic escalation of his long-running feud with America's central bank, former President Donald Trump has signalled he is considering a lawsuit against Federal Reserve Chair Jerome Powell. This extraordinary threat, emerging on Monday 12 January 2026, has sent a stark warning to global financial markets about the potential for political interference in the world's most powerful economy.
A 'Turbulent Priest' and a President's Wrath
Trump has publicly stated he had no prior knowledge of a separate, threatened criminal prosecution by the Justice Department against Powell. However, this attempted distancing has done little to quell concerns. Observers note a deeply worrying parallel to a historical plea against a 'turbulent priest', suggesting one arm of government may be acting on perceived wishes from the top.
The core of the conflict is monetary policy. Trump is aggressively pushing for lower interest rates to stimulate borrowing, spending, and domestic corporate growth. Powell and the Fed, charged with safeguarding economic stability, are resisting this pressure, wary that premature cuts could reignite inflation. The chair's term is set to end in April 2026, and Trump is expected to name a successor by the end of this month.
Markets Deliver Their Verdict: Global and Unforgiving
While Trump may believe he can bend institutions to his will, the reaction of global markets has been swift and unequivocal. Markets do not operate on loyalty or political sentiment. In early trading following news of the probe into Powell and ongoing international unrest, investors flocked to traditional safe havens. Gold and silver prices surged to record highs, a clear signal of anxiety over political instability affecting US economic governance.
This market movement underscores a fundamental truth: Trump cannot bully the financial world. His own experience in real estate has shown him how brutally and quickly markets can turn. The Fed, in its mandated independence, and Powell personally, represent an intractable foe to this style of political pressure.
A Trivial Pretext and a Corrosive Backdrop
The immediate pretext for the legal scrutiny appears remarkably flimsy. Powell is facing questions over cost overruns in the refurbishment of Fed buildings, increases attributed to unforeseen issues like asbestos and lead contamination. The Fed argues the long-term savings will justify the spend.
Powell himself has framed the issue in much starker terms. He warns this is fundamentally about whether the Fed can set interest rates based on evidence or be directed by political intimidation. He emphasises respect for the rule of law but points to the 'unprecedented action' within the context of the administration's ongoing pressure campaign.
The historical irony is palpable. It was Trump who originally nominated Powell to the Fed chairmanship in 2017. That inconvenient detail is now lost in the rush to vilify the outgoing chair.
With Powell's departure imminent, the race to succeed him is heating up. Leading contenders include Trump loyalist Kevin Hassett, Fed critic Kevin Warsh – whom Trump has praised – and current Fed Governor Christopher Waller. Some analysts believe Waller, a less obvious partisan pick, may be the strategic choice, as his appointment would create another vacancy on the Fed board for a Trump ally.
The hurried nature of the legal threat speaks volumes. Prosecutors could have waited, but patience is not this administration's hallmark. The move against Powell is a stark illustration of the high-stakes game being played with the pillars of global economic stability.
