In an extraordinary escalation of political pressure on America's central bank, the US Department of Justice has launched a criminal investigation into Federal Reserve Chair Jerome Powell. The move, ordered under President Donald Trump's administration, marks an unprecedented assault on the Fed's historic independence.
A Chairman's Public Defence
In a remarkable video statement released on Sunday, the typically reserved Powell denounced the investigation. He framed it as direct retaliation for the Federal Reserve's refusal to set interest rates according to the President's demands. "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 declared.
This public rebuttal is Powell's most direct response yet to sustained White House criticism. For much of the past year, he declined to address Trump's frequent social media attacks, where the President labelled him a "very stupid person" and blamed him for damaging the US economy.
The Stated Cause and The Real Battle
Officially, the Justice Department claims the probe concerns potential "abuse of taxpayer dollars" related to renovations at the Fed's Washington DC headquarters. The project's cost has ballooned to $2.5bn from a budgeted $1.9bn in 2019. Trump previously accused Powell of overseeing lavish additions like a VIP dining room and garden terrace, suggesting potential fraud.
However, Powell and observers see a clear pretext. The investigation specifically relates to brief comments he made during a routine Senate Banking Committee hearing in June 2025. In under two minutes of a two-hour session, Powell explained the renovations were essential for safety in buildings not significantly updated since the 1930s. "There's no VIP dining room, there's no new marble," he testified. "We took down the old marble, we're putting it back up."
The Justice Department has now served grand jury subpoenas and threatened a criminal indictment based on this testimony, according to Powell.
Widespread Alarm and Bipartisan Concern
The move has sent shockwaves through the US political and economic establishment. Every living former Fed chair signed a joint statement condemning the investigation, warning that political attacks on central banks lead to economic instability and higher living costs.
Concern has even spread to Republican senators, whose support Trump will need to confirm a new Fed chair when Powell's term ends in May 2026. Senator Thom Tillis of North Carolina vowed to oppose any Trump nominee until the legal matter is resolved. Alaska's Lisa Murkowski called the probe "coercion," highlighting the economic risks of a politicised Fed.
Economists warn that forcing the Fed to cut rates prematurely to suit political goals could trigger a return to 1970s-style inflation and cause global financial market turmoil.
A Long-Running Campaign for Lower Rates
The investigation is the latest salvo in a prolonged White House campaign to influence monetary policy. Trump has long argued that lower interest rates would save "$1tn a year" and boost the economy. The Fed, guided by its dual mandate to control inflation and maximise employment, has maintained a more cautious stance.
The administration's pressure has included firing Fed Governor Lisa Cook, a Biden appointee and voting member of the rate-setting committee. The Supreme Court temporarily reinstated her and will hear arguments on her dismissal.
Powell, initially appointed by Trump in 2018 and reappointed by President Biden in 2022, affirmed his commitment to stand firm. "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation," he stated, framing the conflict as existential for the institution created by Congress in 1913 to operate free from political whims.
