Federal Reserve Chair Yellen Warns—Investigation into Powell Threatens the Independence of the Fed

Former Federal Reserve Chair Janet Yellen expressed serious concerns about the fundamental trust in the financial markets. According to a report by U.S. media CNBC, on January 12, Yellen stated that the investigation into current Chair Jerome Powell’s conduct presents an “extremely serious situation,” and pointed out that the independence of the Federal Reserve as a financial regulatory agency could be significantly compromised.

Warning that market participants are too complacent

Yellen’s most prominent concern is that the entire financial market is not sufficiently responding to the gravity of the situation. “I am surprised that the market is not showing greater concern. Under normal circumstances, the market should be extremely cautious,” Yellen said. The pressure of investigation faced by the Federal Reserve Chair is not merely a personal issue but could pose a structural threat to the independence of monetary policy. This warning suggests how political pressure can threaten the neutrality of financial regulation.

Strong defense of Chair Powell and denial of perjury possibility

Based on her long-standing relationship with Powell, Yellen explicitly stated that the possibility of Powell committing perjury is “virtually zero.” “I know Powell well. I cannot imagine him committing perjury. Ultimately, it seems that the investigators want to remove him from office,” Yellen said. This statement subtly hints that the true purpose of the investigation may be political rather than judicial.

The independence of the Federal Reserve is an essential element in fulfilling its mission of combating inflation and maintaining financial stability. Yellen’s warning reflects a deep concern about the potential risk structures facing the financial markets.