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Trump attacks on Fed: markets show surprising calm despite DOJ inquiry

The Justice Department opens an investigation into Fed Chair Jerome Powell, but Wall Street remains largely unfazed as tensions escalate between the White House and the central bank

It’s no longer the Federal Reserve it once was, and, one might say, the markets aren’t what they used to be either. At least, since Donald Trump entered the White House, markets have stopped behaving according to the usual patterns of cause and effect, which now occur less frequently.

The announcement of a Justice Department investigation into Federal Reserve Chair Jerome Powell should have triggered a market reaction, especially on Wall Street, but such a response has yet to materialize.

Powell’s own comments on the investigation might have been expected to further unsettle investors. He explained that the inquiry—prompted by concerns over allegedly excessive costs for renovating the Fed’s Washington headquarters and the suggestion he misled Congress about the project’s scale—was merely a pretext used by the Trump administration to target him. According to Powell, the real issue is far more fundamental: “setting interest rates based on our best assessment, not on the president’s preferences.” In other words, Trump is attacking Powell for performing his role as a central banker, upholding the principles of autonomy and independence.

This is a showdown between the President of the United States and the Chair of the Fed, seemingly with the complicity of the Justice Department. The independence of the Federal Reserve has long been a cornerstone of financial stability in the U.S. Trump’s attacks on Powell have been relentless and explicit, driven by dissatisfaction with the Fed’s decisions—or indecisions—on interest rates. Now, the verbal attacks are accompanied by formal action: the opening of a DOJ investigation.

Ordinarily, this would be enough to trigger a significant financial crisis, as has historically occurred whenever political power threatens an oversight authority that is, by definition, meant to be untouchable without just cause. Yet, so far, the markets are barely moving.

The same phenomenon has appeared in part with Trump’s tariffs and geopolitical threats. Observers are asking why this is possible. A plausible answer lies in a dangerous concept in finance: complacency. It seems the continuous barrage from Trump across multiple fronts has, in a way, “neutralized” the investors’ capacity to react.

Will this calm last? That is far more difficult to predict, and no one can say for certain.

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