The Trump administration sharply intensified its assault on the Federal Reserve’s independence this evening, threatening a fundamental cornerstone of the international monetary and financial system—and a key factor underpinning the dollar’s global dominance.

According to multiple news sources and officials themselves, US prosecutors today served the central bank with grand jury subpoenas and a threat of criminal indictment over Chair Jerome Powell’s testimony before the Senate Banking Committee last June—in which he defended cost overruns on a long-standing headquarters renovation projection.

In a video statement released on the bank’s website, Powell dismissed the scrutiny as a politically-motivated attempt to undermine the Fed’s autonomy in setting monetary policy, stressing that the institution’s decisions should be guided by economic evidence rather than political influence.

“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” he said. “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,”, instead “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”. “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation”.

Powell’s term expires in May, and the White House is reportedly weighing several potential successors, including Kevin Hassett and Kevin Warsh, who are both seen as willing to bow to President Trump’s demands for lower interest rates.

Although the prospect of a change in leadership alone has raised doubts about the Fed’s ability to safeguard price stability, the administration’s renewed willingness to threaten serving officials with criminal charges could deepen market concerns. If a wider cross-section of the central bank’s rate-setting committee is seen as vulnerable to overwhelming political suasion, inflation expectations are likely to rise, and the institution’s reliability in backstopping the financial system during crises could come under question.

A sustained selloff looks unlikely—at least not on the scale seen during the administration’s rollout of the “Liberation Day” tariff regime last year, when investors grew alarmed over the dollar’s future as a global reserve currency and real-money asset managers lifted hedge ratios dramatically. Safe-haven currencies like the Japanese yen and Swiss franc should enjoy a modest round of outperformance in the short term. But a prolonged erosion of confidence in the Federal Reserve’s independence could weigh on the greenback, lift long-term yields and amplify global market volatility—outcomes at odds with the administration’s stated aims.