The financial world is abuzz following revelations of a Department of Justice (DOJ) investigation into Federal Reserve Chair Jerome Powell. This investigation stems from a substantial $2.5 billion renovation of the Federal Reserve’s headquarters, raising questions about central bank independence and market stability.
DOJ Investigates Federal Reserve Leadership
In a rare video statement on Sunday, Powell disclosed that the DOJ had issued grand jury subpoenas to the Federal Reserve. The investigation appears to focus on the decision-making processes behind the headquarters’ renovation budget, while Powell claims this move infringes on the institution’s independence in relation to interest rate policies.
Market Reactions to the News
Stock markets reacted strongly, with futures taking a downturn after the announcement. Dow Jones futures fell 0.5%, the S&P 500 slipped 0.6%, and Nasdaq 100 recorded the largest decline at 0.9%. This comes after a week of record highs, with the S&P 500 climbing 1%, the Dow adding 2.3%, and Nasdaq gaining 1.9% on expectations of steady Federal Reserve policies.
Prediction Markets and Federal Reserve Leadership
Despite the turbulence, decentralized prediction platforms such as Polymarket indicate only an 8% probability of Powell leaving his role by March 31, 2026. Regulated trading platform Kalshi paints a similar picture, showing a 19% chance of Powell exiting before May 2026. These insights suggest that traders anticipate Powell to remain in his position despite the ongoing criminal probe.
Gold and Cryptocurrencies Hold Steady
As equity markets faltered, gold saw a significant jump, rising above $4,580 per ounce and signaling a shift to safer assets. Meanwhile, cryptocurrencies like Bitcoin and Ethereum remained relatively stable, trading near $91,400 and $3,125, respectively, underscoring muted anxiety about monetary policy changes.
Who Could Be Next at the Helm?
Speculation on Powell’s potential successor is intensifying. Kevin Warsh, a noted advocate for stricter monetary policies and reduced government spending, is the frontrunner according to Polymarket, with a 43% chance of filling the role. Warsh’s reformist approach could signal significant changes to Federal Reserve policies moving forward.
Other Key Economic Developments Await
Investors are closely watching economic data releases this week, including the consumer inflation report and upcoming quarterly earnings from leading banks such as JPMorgan Chase and Goldman Sachs. These reports will likely influence Federal Reserve actions in the coming months.
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