Trump Pressures Powell With Criminal Charges... Fitch: "Fed Independence Is Key to U.S. Credit"

"Key Factor Behind the 'AA+' Rating"

Exterior of the London office of Fitch, one of the world's top three credit rating agencies. Photo by Reuters and Yonhap News.

As U.S. President Donald Trump is moving to pursue criminal charges against Jerome Powell, Chair of the Federal Reserve (Fed), international credit rating agency Fitch has pointed out that the Fed’s independence is a key factor in maintaining the United States’ sovereign credit rating of ‘AA+’.

Richard Francis, Senior Director at Fitch, told Reuters on the 12th (local time), “The independence of the Fed is a core element supporting the United States’ sovereign credit rating (AA+).”

Senior Director Francis also stated that Fitch will closely monitor changes in governance, institutional checks and balances, and the Fed’s performance in managing price stability when evaluating the U.S. sovereign credit rating.

Reuters noted that these remarks came after President Trump recently suggested that Powell could be prosecuted, using the Fed building project as a pretext.

Chair Powell, who is set to retire in May, revealed in a video released on the 11th that “In connection with my congressional testimony last June regarding the Fed headquarters renovation, I received a grand jury subpoena and threats of criminal charges from the Department of Justice on the 9th.” This indicates that a government investigation was launched over the renovation costs of the Fed headquarters.

This has been a frequent point of criticism for President Trump when targeting Chair Powell. In July last year, in an unusual move for a sitting president, Trump personally visited the renovation site of the headquarters in Washington, D.C. At the time, President Trump pointed out the increased construction costs, stating, “The budget was 2.7 billion dollars, but it has risen to 3.1 billion dollars.” He has also publicly pressured Powell to cut policy rates more quickly, calling him “a stubborn fool” and “slow Powell” for not lowering rates fast enough.

Such concerns have been evident since last year. Standard & Poor’s (S&P), which is considered one of the top three credit rating agencies alongside Fitch and Moody’s, maintained the U.S. sovereign credit rating at AA+ in a report released in August last year, and cited the credibility of the Fed as a key factor in its rating.

In the report, S&P warned, “If changes in the political landscape undermine the soundness of U.S. institutions, the effectiveness of long-term policy decisions, or the independence of the Fed, the sovereign credit rating could come under pressure.” The report also stated, “The credibility of the Fed is unparalleled. It supports the flexibility of U.S. monetary policy and the dollar’s status as the world’s reserve currency, and both are core elements of the sovereign credit rating.”