Federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell, a development he publicly disclosed on Sunday in an extraordinary escalation of tensions between the US central bank and the White House.
Powell said the US Department of Justice (DoJ) has served the Federal Reserve with subpoenas and threatened criminal indictment related to testimony he gave before a Senate committee concerning renovations to Federal Reserve buildings. Describing the investigation as “unprecedented,” Powell suggested it stemmed from President Donald Trump’s anger over the Fed’s refusal to cut interest rates despite sustained political pressure.
Trump denied any knowledge of the investigation. “I don’t know anything about it,” the president said in an interview with NBC News, while again criticizing Powell’s leadership. The DoJ has been contacted for comment.
Until now, the long-running feud between Trump and Powell had largely consisted of public criticism from the president, who has repeatedly referred to the Fed chair as “Mr Too Late” and a “numbskull.” Powell’s statement marks the first time he has forcefully and publicly pushed back, warning that the independence of the Federal Reserve itself is now under threat.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions,” Powell said, “or whether monetary policy will instead be directed by political pressure or intimidation.”
While emphasizing his respect for the rule of law, Powell said the investigation must be viewed in the broader context of ongoing pressure from the administration. “No one—certainly not the chair of the Federal Reserve—is above the law,” he said. “But this unprecedented action should be seen alongside repeated threats directed at the institution.”
Trump, however, dismissed Powell’s competence once again. “He’s certainly not very good at the Fed, and he’s not very good at building buildings,” the president said.
‘Extremely Chilling’
Former Federal Reserve Chair Janet Yellen, who briefly served during Trump’s first term before being replaced by Powell, described the probe as “extremely chilling” and warned that financial markets should be concerned.
“Knowing Powell as well as I do, the odds that he would have lied are zero,” Yellen told CNBC. “I believe they are going after him because they want his seat and want him gone.”
She added that Trump’s pressure on the Fed to cut rates—particularly to reduce interest payments on the national debt—risked undermining democratic institutions. “It is the road to a banana republic,” she said, arguing the investigation shows “the lengths to which the president is willing to go to have his way.”
The Renovation Dispute
The investigation centers on testimony related to the renovation of two Federal Reserve buildings—the Eccles Building and the 1951 Constitution Avenue building—the first major overhaul since their construction in the 1930s. The project includes extensive health and safety work, such as asbestos and lead removal.
The Fed has said the renovations will lower operating costs over time. Trump, however, has repeatedly criticized the project’s rising costs, claiming it will total $3.1 billion (£2.3 billion), significantly higher than the Fed’s own estimate of $2.5 billion.
Powell was originally nominated as Fed chair by Trump in 2017. He is scheduled to step down in May, and Trump is expected to name a successor by the end of the month—though the ongoing investigation could complicate that process.
Political Fallout
Republican Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, said he would oppose confirmation of any Fed chair nominee—or any new Fed Board member—until the investigation is resolved.
“If there were any remaining doubt that advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said, adding that the credibility of the Department of Justice is now also at stake.
Democratic Senator Elizabeth Warren accused Trump of attempting to push Powell out entirely. “This is about installing another sock puppet to complete a corrupt takeover of America’s central bank,” she said, urging the Senate to halt all Fed nominations.
According to the New York Times, the investigation is being overseen by the US Attorney’s Office for the District of Columbia.
Market Reaction
The investigation, combined with continued unrest in Iran, fueled a surge in precious metals. Gold rose 2.5% on Monday to a record $4,624.53 per ounce, while silver jumped 7.3% to an all-time high of $85.86 per ounce.
Despite Powell’s warning that central bank independence is at risk, US equity markets showed little reaction. The S&P 500, Dow Jones Industrial Average, and Nasdaq all finished broadly flat.
