Federal Reserve Chair Jerome Powell has publicly condemned a criminal investigation initiated by the U.S. Department of Justice, framing it as a politically motivated attack by the Trump administration aimed at undermining the central bank's independence on interest rate policy. The probe, first reported by The New York Times, was opened on Friday by the U.S. attorney for Washington, D.C., and focuses on the Fed's headquarters renovation and whether Powell misled Congress about the project's scale.
Powell issued a stark warning in a statement on Sunday, declaring the investigation is "a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President." He emphasized the core issue is "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."
The backdrop is a long-running feud between Powell and former President Donald Trump, who has repeatedly attacked the Fed for refusing to cut interest rates upon his demand. Trump has previously threatened to fire Powell and did fire Fed Governor Lisa Cook over fraud accusations—a move later blocked by the Supreme Court. With Powell's term ending in May, Trump has lined up loyalists, including key economic adviser Kevin Hassett as a frontrunner successor, though Hassett has stated Trump's views would hold "no weight" on agency decisions.
In a related development, Trump has denied any involvement with the DOJ's reported subpoena of Powell, a statement reported by Walter Bloomberg. This denial, however, has done little to calm financial markets or legal scholars, who see the mere existence of the probe as an unprecedented test of central bank autonomy. Market reactions included volatility in S&P 500 futures and pressure on bond yields, highlighting investor concern over perceived Fed independence.
Legal experts, such as Dr. Eleanor Vance from Georgetown University Law Center, note the action "tests the boundaries of the long-standing norm separating monetary policy from partisan politics." There is no modern precedent for a DOJ criminal investigation into a sitting Fed Chair, with oversight typically handled by Congress or internal auditors. The situation raises profound risks for market stability, currency fluctuations, and the global perception of U.S. financial governance.
