Federal Prosecutors Open Criminal Investigation Into Fed and Jerome Powell

Federal prosecutors have opened a criminal investigation into the Federal Reserve and its chair, Jerome Powell, escalating an already tense standoff between the central bank and the Trump administration.

The probe centers on the Fed’s $2.5 billion renovation of its Washington headquarters and Powell’s testimony to Congress in June about the project. The investigation marks an unprecedented move against the traditionally independent institution that sets US monetary policy.

In a rare and forceful video statement released Sunday night, Powell said the investigation was politically motivated and directly linked to pressure from President Donald Trump over interest rate decisions.

“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, rather than following the preferences of the President,” Powell said.

Independence Under Pressure

Powell warned that the probe raises fundamental questions about whether the Fed can continue to operate without political interference.

“This is about whether the Fed will be able to set interest rates based on evidence and economic conditions, or whether monetary policy will be directed by intimidation,” he said.

The Department of Justice declined to comment on the investigation. A DOJ spokesperson said the attorney general is focused on investigating potential misuse of taxpayer funds. The White House referred questions to the Justice Department.

Trump denied direct knowledge of the investigation in an interview with NBC News, while renewing criticism of Powell’s leadership, saying the Fed chair was “not very good at the Fed and not very good at building buildings.”

A Long-Running Clash

Trump and his allies have spent the past year publicly pressuring Powell to cut interest rates more aggressively. While the Fed lowered rates three times in the second half of last year, policymakers have recently signalled caution amid inflation risks.

The conflict has also spread to other Fed officials. Trump previously targeted Fed Governor Lisa Cook, whom he fired last year amid allegations that have not resulted in criminal charges. The Supreme Court is set to hear arguments on whether the president had authority to remove her.

The headquarters renovation has become a focal point of criticism from Trump allies, including officials at the Office of Management and Budget and the Federal Housing Finance Agency. The Fed has defended the project, citing asbestos removal and critical upgrades to aging electrical and ventilation systems.

Political Fallout

The investigation immediately drew sharp reactions from Congress. Republican Senator Thom Tillis said he would block confirmation of any new Fed nominee until the matter is resolved. Democratic Senator Elizabeth Warren urged the Senate to halt all Fed confirmations tied to Trump.

Senate Minority Leader Chuck Schumer called the investigation an attack on economic stability, saying it threatens the credibility of the US financial system.

Markets on Edge

Investors and analysts warned the probe could undermine confidence in the world’s most influential central bank.

“This is a deeply disturbing development,” wrote Evercore ISI vice chairman Krishna Guha, adding that it suggests the administration and the Fed are now in open conflict.

The investigation comes as Trump prepares to name Powell’s successor when his term ends in May. Potential candidates reportedly include Kevin Hassett, Kevin Warsh, and Rick Rieder.

For global markets, the episode has revived fears that political pressure could weaken the Fed’s independence, a cornerstone of trust in the US dollar and the broader financial system.

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