Federal Reserve Chair Jerome H. Powell has disclosed that the US Department of Justice has launched a criminal investigation against him, marking an extraordinary escalation in the long-running confrontation between the central bank and President Donald Trump's administration.
Powell revealed that federal prosecutors have issued grand jury subpoenas linked to his testimony before Congress last year, a move he says is less about legal substance and more about political pressure.
The development has sharpened concerns about whether the Federal Reserve's independence is being tested in unprecedented ways amid fragile global economic confidence.
He characterised the threat of indictment as part of the administration's sustained pressure to influence central bank decisions.
The probe centres on Powell's June 2025 Congressional testimony and the Fed's £2 billion ($2.5 billion) renovation of its Washington headquarters, although Powell insists the legal threat is a pretext to undermine Fed independence.
Criminal Inquiry Deepens Political Strain
Powell released a statement on the Federal Reserve's official website outlining the unprecedented legal threat he faces. He said that the Department of Justice had served the federal bank with subpoenas on the previous Friday, warning of a possible criminal indictment related to his testimony before the Senate Banking Committee.
Powell stressed that the subpoenas were not fundamentally about his actual testimony or the renovation project, but were instead connected to the broader political context surrounding interest-rate decisions.
'Those are pretexts,' Powell said, characterising the threat as a consequence of the Fed setting rates based on economic evidence rather than presidential preference.
He warned that the action raises fundamental questions about whether monetary policy could become subject to political intimidation.
The White House and the Justice Department have declined detailed comment on the investigation, and it remains unclear whether formal charges will be filed against Powell.
Notably, issuing subpoenas or opening an investigation does not guarantee prosecution; proving any criminal falsehood in congressional testimony requires establishing that any misstatement was knowing and willful.
Fed Independence at Stake
Powell's confrontation with the Justice Department follows months of escalating tension with Trump. The president, who appointed Powell to a second term as Fed chair, has repeatedly criticised the central bank for refusing to cut interest rates as aggressively as he prefers, framing the independent monetary authority as too cautious and overly bureaucratic.
Trump publicly warned late last year that he was considering legal action against Powell for 'gross incompetence', a rare and pointed rebuke of a sitting Fed chair.
The renovation project, which has drawn scrutiny for its £2 billion ($2.5 billion) price tag and extended timeline, was approved in 2022 and has been a recurring point of contention. Critics in Congress and the Trump administration have alleged budget overruns and questioned whether Powell's testimony accurately reflected the evolution of the plans.
Powell, who has served under four presidential administrations, defended his record and reaffirmed the Fed's mandate to pursue price stability and maximum employment without partisan influence. 'Public service sometimes requires standing firm in the face of threats,' he said.
Market and Institutional Repercussions
Financial markets reacted immediately to Powell's announcement. The US dollar weakened against major currencies as investors weighed the implications of potential political interference in monetary policy, while gold prices surged as a hedge against uncertainty.
Economists warn that a perceived erosion of the Fed's autonomy could undermine confidence in the world's largest economy and complicate efforts to manage inflation and economic growth. Independent central banks are typically insulated from day-to-day politics because that independence underpins their credibility with investors and the global financial system.
Nevertheless, Powell has indicated he will remain in office and carry out his duties through his term, which expires in May 2026. The law provides robust protections against removal of a Fed chair except 'for cause', a high threshold requiring proof of malfeasance or serious misconduct.
In parallel, Trump has pursued other efforts to reshape the Fed's leadership, including an attempt to remove Governor Lisa D. Cook, a case now before the Supreme Court that underscores the wider struggle over central bank governance.
Powell's assertion that the criminal threat stems from his refusal to 'bend the knee' to political demands encapsulates the profound constitutional and institutional tensions now at play between the executive branch and a cornerstone of US economic policy.
