A rare and escalating confrontation between the White House and the Federal Reserve is unsettling global financial markets and reviving long-standing fears over political intrusion into monetary policy.

The flashpoint is an unusual legal escalation. Federal Reserve Chair Jerome Powell has disclosed that the Justice Department has issued subpoenas related to his congressional testimony on the central bank’s headquarters renovation, a move he characterised as unprecedented.

The episode unfolds against the backdrop of renewed attacks by President Donald Trump, who has repeatedly criticised Powell for resisting pressure to cut interest rates more aggressively.

Markets responded with visible unease. U.S. equity futures softened, Treasury yields became more volatile, and investors sought refuge in traditional safe-haven assets, including gold and the Swiss franc. The dollar weakened modestly, reflecting concerns that institutional independence, long a cornerstone of U.S. financial stability may be under strain.

The implications extend well beyond short-term market swings. The Federal Reserve’s credibility underpins global capital flows, inflation expectations and the pricing of risk worldwide.

Any perception that monetary policy could be subordinated to political objectives risks higher long-term borrowing costs, greater currency volatility and a diminished role for the dollar as the world’s anchor currency.

For investors and policymakers abroad, the episode delivers an uncomfortable signal; America’s institutional guardrails, once assumed to be robust, are again being tested and markets are adjusting their assumptions accordingly.