Federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell, escalating a long-running conflict between the US central bank and President Donald Trump and raising fresh questions about the Fed’s independence.
The New York Times first reported the probe.
In a video and written statement released Sunday evening, Powell said the Justice Department had served the Federal Reserve with grand jury subpoenas on Friday, threatening a criminal indictment linked to his June testimony before the Senate Banking Committee and a $2.5 billion renovation of the Fed’s headquarters in Washington, DC.
He argued the probe should be viewed in the broader context of political pressure from the White House over interest rate policy.
Powell said, “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.”
Subpoenas tied to renovation testimony
Powell said his congressional testimony addressed a multi-year renovation of historic Fed buildings, whose estimated costs have risen from $1.9 billion in 2023 to $2.5 billion in 2025.
The Fed has attributed the increase to higher material and labor costs, changes between initial and final estimates, and unforeseen issues such as toxic contamination.
During his testimony last June, Powell disputed claims that the project included extravagant features such as VIP dining rooms or rooftop gardens, saying some earlier design elements were no longer part of the plans.
Critics within the Trump administration and some Republican lawmakers have accused Powell of misleading Congress, allegations he has denied.
“It is not about Congress’s oversight role; the Fed made every effort to keep Congress informed,” Powell said, calling the investigation’s stated rationale a “pretext.”
He added that no one, including the Fed chair, is above the law, but described the move as unprecedented.
Fed independence in focus
Powell linked the investigation directly to the central bank’s refusal to cut interest rates as aggressively as President Trump has demanded since returning to the White House in January 2025.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public,” Powell said, warning that the outcome could shape the future of US monetary policy.
Trump denied knowledge of the probe in an interview with NBC News, saying it had nothing to do with interest rates. However, he again criticized Powell’s performance, saying the Fed chair was “not very good” at managing rates or overseeing the renovation.
The investigation is being overseen by the US Attorney’s Office for the District of Columbia, led by Jeanine Pirro, a Trump appointee.
A Justice Department spokesperson said US attorneys have been instructed to prioritize investigations into potential abuse of taxpayer dollars.
Political and market reaction
The development drew sharp reactions from lawmakers across party lines.
Republican Senator Thom Tillis said he would oppose confirmation of any new Fed nominee until the legal matter is resolved, while Democrats, including Senate Minority Leader Chuck Schumer and Senator Elizabeth Warren, warned the probe threatens the Fed’s independence.
Financial markets reacted swiftly. Stock futures fell following Powell’s statement, while the US dollar weakened against major currencies, and gold rose to a record high.
Powell’s term as Fed chair expires in May, though his term as a governor runs until 2028.
He said he intends to continue carrying out his duties “with integrity and a commitment to serving the American people.”
President Trump has stated that he has already selected a successor, with Kevin Hassett widely regarded as a leading contender, although no formal nomination has been announced.
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