White House senior adviser Kevin Hassett is directly challenging Jerome Powell‘s claim that the Justice Department’s probe is rooted in President Trump‘s political payback over interest rates, framing the case instead around the Fed’s soaring renovation costs.
Speaking Monday on CNBC, Hassett insisted the focus is strictly financial. “I don’t think rate stance had anything to do with events,” Hassett said, distancing the administration from Powell’s warning of political meddling.
Instead, he cited “dramatic cost overruns” on the Fed’s $2.5 billion renovation of two office buildings.
“Big cost overruns look inconsistent with testimony,” the Director of National Economic Council added, casting doubt on Powell’s June statements before the Senate Banking Committee.
For months, Hassett had been lingering at the edge of the Federal Reserve conversation—an adviser with proximity, influence, and loyalty to Trump.
Just one day earlier, Powell said in a video statement that the Fed had been served with subpoenas and faced threats of criminal charges tied to his congressional testimony.
He called the move a “pretext” aimed at swaying monetary policy. “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 said.
Is Hassett Now The Front-Runner?
Traders are treating the moment as a live succession fight. On Polymarket, odds of Hassett being nominated by Trump as next Fed chair jumped to 43%, surpassing Kevin Warsh.
The tension between Powell and Hassett reflects two competing visions of central banking.
Powell has repeatedly emphasized data-dependence and insulation from political pressure, arguing that credibility is the Fed’s most valuable asset.
Hassett, by contrast, has consistently argued that interest rates are too restrictive and that the central bank risks choking off growth by resisting faster easing.
Powell’s term expires on May 14, 2026, yet the market is speculating that the president may remove him even before the end of his term.
The odds of Trump suing Powell by March 31 rose to 27%.
Another likely outcome is Powell not only losing the Fed chair but also being removed from the Fed board, with the chance rising to 70%.
Yardeni: ‘Clearly The Market Doesn’t Like It’
Veteran market strategist Ed Yardeni made clear that markets are already responding negatively to the administration’s escalation against the Fed.
“Clearly the market doesn’t like it,” Yardeni said on CNBC. “Gold is at an all-time record high.”
He said he expected turbulence around the Fed chair pick, not an investigation into Powell.
“I did think we were going to have some turbulence related to the Fed, but I thought it was going to be when Trump actually picked his new Fed chair,” Yardeni said. “I didn’t expect that he’d actually go through with trying to investigate Powell,” he said.
Yardeni also flagged the bond market as the next pressure point.
“It looks like this issue with the Fed could already cause the bond vigilantes to act up,” he said.
On monetary policy, he added: “If the Fed just continues to lower rates… because of pressure from the administration, that could create a melt-up,” with liquidity flowing into markets instead of the real economy.
The Legal View: Easy To Open, Hard To Convict
Jonathan Kanter, former assistant attorney general and a law professor, said on CNBC the referral appears tied to perjury before Congress. “The bar for opening up a criminal investigation is very low,” Kanter said.
“The bar for convicting somebody for a crime is very high.” He described the road from investigation to conviction as steep.
“What it would take to go from, you know, a concern that perhaps he misrepresented something before Congress to actually a conviction is a very long road,” Kanter said.
He said perjury cases tied only to testimony are uncommon.
“An investigation, lying before Congress, it’s hard, it’s unusual, and it’s going to be very difficult,” Kanter said.
Market Reactions: Dollar Down, Yields Up, Gold At Records
Investors moved fast after Powell’s comments. S&P 500 contracts fell 0.4%. Nasdaq 100 futures fell 0.6%.
The dollar index fell 0.5%, eyeing its worst session since before Christmas. Longer-dated yields rose, with the 30-year rate jumping 4 basis points to 4.86%.
Gold – as tracked by the SPDR Gold Trust (NYSE:GLD) – soared by 2.7% to $4,620 and hit a new high. Silver rallied 7% beyond $84 per ounce.
For traders, Hassett’s message is now part of the price action: he is not echoing Powell’s warning. He is disputing it, and markets are treating the Fed chair race as already underway.
Image: Shutterstock
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