The US Justice Department's investigation into the Federal Reserve and Chairman Jerome Powell's harsh comments have heightened market concerns about the US central bank's independence.
Powell described the investigation as a political effort to influence monetary policy, with President Trump continuing to pressure the Fed to cut interest rates more aggressively.
The market reacted, indirectly weakening the US dollar. On the other hand, gold rose, long-term bond yields rose and US stocks were depressed, reflecting concerns about political interference.
Analysts have warned that pressure on the Fed could have unintended consequences, including higher inflation expectations and rising funding costs.
While some expect the Fed to remain data-driven, the episode marks a new risk to investor confidence in US institutions.
