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Powell Confirms Criminal Investigation

Federal Reserve Chair Jerome Powell disclosed that he is under a federal criminal investigation related to a $2.5 billion renovation of the Fed’s historic headquarters in Washington and his testimony to Congress about the project. Speaking in a video statement released Sunday evening, Powell said the Department of Justice had issued grand jury subpoenas on Friday that could lead to a criminal indictment.

Powell argued that the investigation is not truly about construction costs or congressional oversight. Instead, he framed it as retaliation for the Fed’s refusal to cut interest rates as aggressively as President Donald Trump has demanded since returning to the White House in January 2025.

A Direct Warning on Fed Independence

In unusually blunt remarks, Powell said the investigation strikes at the core of U.S. monetary policy independence.

He warned that the case will determine whether the Federal Reserve can continue setting interest rates based on economic data, inflation trends, and employment conditions, or whether policy decisions will be shaped by political pressure and intimidation.

Powell emphasized that he has served under four administrations from both parties and has consistently focused on the Fed’s dual mandate of price stability and maximum employment. He said he would continue to carry out the role he was confirmed to do, regardless of external threats.

Renovation Costs at the Center of the Probe

The investigation centers on a multi-year renovation of the Federal Reserve’s headquarters complex, a project whose estimated cost has risen to roughly $2.5 billion. Critics, including President Trump, have repeatedly attacked the project as excessive and poorly managed, with Trump claiming the total cost could exceed $4 billion and calling it the most expensive construction per square foot in history.

Powell has said the Fed fully briefed Congress on the renovation through testimony and public disclosures and rejected allegations that he misled lawmakers. He described claims tied to his Senate Banking Committee testimony last June as pretexts rather than the true motivation behind the probe.

Markets React Swiftly

Financial markets responded immediately to Powell’s statement. Stock futures moved lower following the disclosure, reflecting investor unease over rising political risk and potential threats to central bank independence.

Market strategists warned that sustained pressure on the Fed could drive volatility across U.S. assets, including equities, Treasurys, and the dollar, as investors reassess institutional stability and policy credibility.

Some analysts said the situation could resemble previous episodes where fears of political interference prompted a higher risk premium on U.S. financial assets and boosted demand for safe havens such as gold.

Trump Denies Involvement, Keeps Criticism

President Trump said in an interview Sunday night that he was unaware of the specific investigation into Powell. However, he renewed his criticism of the Fed chair’s performance, saying Powell has failed both on interest rates and on managing the renovation project.

Trump insisted the subpoenas have nothing to do with monetary policy, while reiterating that interest rates remain far too high. He has repeatedly argued that faster and deeper rate cuts are needed to support growth.

In late December, Trump publicly floated the idea of suing Powell for incompetence over the renovation and said he would like to fire him, though Powell’s current term as chair runs until May.

Political Fallout Intensifies

The investigation has triggered sharp reactions across Capitol Hill. Senator Thom Tillis, a Republican member of the Senate Banking Committee, said he would oppose any nominee put forward by Trump to replace Powell, as well as any new Fed board nominee, until the legal matter is fully resolved.

Tillis said the episode raises serious questions about the independence of both the Federal Reserve and the Department of Justice.

Democratic leaders echoed those concerns. Senate Minority Leader Chuck Schumer said the investigation represents a continued assault on the Fed’s independence and warned it could undermine economic stability. Senator Elizabeth Warren accused Trump of abusing the Justice Department to reshape the central bank in his own image and urged the Senate to halt consideration of any Fed nominations.

Roots of the Case and What Comes Next

The probe follows a referral made nearly six months ago by Representative Anna Paulina Luna, who accused Powell of perjury and making false statements related to the renovation project. Luna said unelected officials should not be shielded from accountability and welcomed DOJ involvement.

The investigation is being handled by the U.S. Attorney’s Office for the District of Columbia, currently led by Jeanine Pirro, a Trump appointee. The New York Times first reported the existence of the probe.

Powell’s position adds another layer of complexity. While his term as Fed chair ends in May, his term as a Fed governor runs until January 2028. Some analysts speculate that he could choose to remain on the board even after stepping down as chair, limiting Trump’s ability to reshape the Fed quickly.

Broader Implications for the Economy

Economists warn that sustained political pressure on the Federal Reserve could erode confidence in U.S. institutions at a sensitive time. Inflation has only recently shown signs of easing, and interest rate expectations remain a key driver of markets, borrowing costs, and investment decisions.

As the investigation unfolds, investors, lawmakers, and global markets will be watching closely. The outcome may not only shape Jerome Powell’s future but also set a precedent for how far political power can reach into the heart of U.S. monetary policy.