U.S. prosecutors have opened a criminal investigation into Jerome Powell, escalating tensions between the White House and the central bank in what critics describe as a direct challenge to the Federal Reserve’s independence.
In a video statement released on Jan. 11, Powell confirmed that the Department of Justice has issued grand jury subpoenas related to his June 2025 testimony before the Senate Banking Committee. The investigation centers on whether Powell misled lawmakers during questioning.
Probe focuses on Fed renovation costs
According to Powell, the inquiry relates to congressional testimony concerning cost overruns tied to a $2.5 billion renovation of the Federal Reserve’s historic headquarters and surrounding buildings in Washington, D.C.
The investigation follows a referral from Anna Paulina Luna, a Republican lawmaker who accused Powell of providing false or misleading statements to Congress about the scope and cost of the project. The U.S. Attorney’s Office for the District of Columbia approved the probe in November.
Powell rejected the allegations, saying Congress had been kept informed through regular testimony and public disclosures. He argued that the renovation issue is being used as a pretext for political retaliation tied to disagreements over monetary policy.
“This is about whether the Federal Reserve will continue to set interest rates based on evidence and economic conditions,” Powell said, “or whether monetary policy will be directed by political pressure.”
Clash over interest rates and Fed independence
The investigation comes amid sustained criticism of Powell from Donald Trump, who has repeatedly attacked the Fed chair over interest rate policy and questioned the renovation project’s scale and cost. Trump has openly discussed replacing Powell when his term ends in 2026 and has previously suggested legal action against him.
The case marks a sharp escalation in pressure on the Federal Reserve. The administration has already sought to reshape the Fed’s leadership by appointing a close ally to the Board of Governors and attempting to remove Governor Lisa Cook over allegations that have not been substantiated.
Pam Bondi said the investigation is focused on accountability and the use of taxpayer funds. Trump, speaking in a television interview, denied directing the probe but again criticized Powell’s performance as Fed chair.
Lawmakers warn of dangerous precedent
The investigation has triggered bipartisan concern on Capitol Hill. Thom Tillis, a Republican senator, warned that pursuing criminal charges against a sitting Fed chair could severely undermine the central bank’s independence. He said he would oppose future Federal Reserve nominations until the matter is resolved.
Powell, who has served under four presidential administrations, said he has no intention of stepping down and will continue to carry out the Fed’s dual mandate of price stability and maximum employment.
“Public service sometimes requires standing firm,” Powell said, adding that the Federal Reserve must remain insulated from political intimidation to function effectively.
As the investigation unfolds, analysts warn that the case could have far-reaching implications for financial markets, central bank credibility, and the long-standing separation between monetary policy and political power in the United States.
