The Trump administration has opened a criminal investigation into U.S. Federal Reserve Chair Jerome Powell, triggering sharp political backlash and renewed concern over the independence of the world’s most powerful central bank.
The probe became public late Sunday after Powell disclosed that the U.S. Justice Department issued subpoenas to the Federal Reserve. The subpoenas relate to statements he made to Congress about cost overruns tied to a $2.5 billion renovation project at the Fed’s Washington headquarters.
Powell responded forcefully, calling the investigation a “pretext” designed to give the White House influence over interest rate decisions.
He warned that the action threatens the long-standing principle of central bank independence, which shields monetary policy from political pressure.
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Sources familiar with the case said Jeanine Pirro, the U.S. Attorney for Washington and a close ally of President Donald Trump, approved and launched the investigation.
The sources added that Attorney General Pam Bondi and Deputy Attorney General Todd Blanche were not briefed before the subpoenas were issued last week.
In a statement on Monday, Pirro said her office acted because the Federal Reserve failed to engage officials on rising renovation costs at two historic buildings.
“This office makes decisions based on the merits,” Pirro said.
Market Reaction and Investor Concerns
The threat of a possible indictment unsettled financial markets. Long-term U.S. Treasury yields rose as investors assessed the risks of a politicised Federal Reserve.
Analysts warned that higher borrowing costs could undermine the administration’s efforts to address inflation and affordability.
Market moves remained measured. Gold hit a record high, the dollar weakened, and major U.S. stock indexes closed at record levels, driven largely by gains in artificial intelligence stocks and Walmart.
Former Federal Reserve chairs Janet Yellen, Ben Bernanke, and Alan Greenspan issued a rare joint warning alongside former economic policymakers from both major parties.
They said political interference in monetary policy mirrors practices in countries with weak institutions and often leads to inflation and economic instability.
Central bank chiefs from France and Canada also voiced public support for Powell.
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Several Republican lawmakers criticised the investigation. Senator Thom Tillis, a member of the Senate Banking Committee, called the move a “huge mistake.”
He said he would block any Trump nominees to the Federal Reserve until the issue is resolved. Senators Kevin Cramer and Lisa Murkowski echoed his concerns.
Murkowski warned that weakening the Fed’s independence would harm financial markets and the wider economy.
Even some of Powell’s frequent critics expressed doubt. Senator Cynthia Lummis said prosecutors would struggle to prove criminal intent. Senator John Kennedy dismissed the probe as unnecessary.
Axios reported that Treasury Secretary Scott Bessent privately told President Trump that the investigation had “made a mess” and could hurt financial markets.
Trump later told NBC News he had no knowledge of the Justice Department’s actions. However, he criticised Powell’s leadership at the Fed and his handling of the renovation project.
Trump nominated Powell in 2017, and the Senate confirmed him in 2018. Powell’s term as Fed Chair ends in May, but he can remain on the Board of Governors until 2028.
Analysts say the investigation may increase the likelihood that Powell stays on in defiance of political pressure.
The probe also comes weeks before the Supreme Court hears arguments linked to Trump’s attempt to remove Fed Governor Lisa Cook, deepening fears of executive overreach.
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Until now, Powell has avoided direct public confrontation with the Trump administration. Republican lawmakers also remained largely silent as tensions simmered during Trump’s second term.
That restraint ended this week.
“I respect the rule of law,” Powell said. “But this action must be viewed in the context of ongoing pressure on the Federal Reserve to follow presidential preferences.”
A Justice Department spokesperson declined to comment on the case but said prosecutors have been instructed to prioritise investigations involving possible misuse of taxpayer funds.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
