Federal Reserve Chair Jerome H. Powell disclosed that the U.S. Department of Justice has opened a criminal investigation into his conduct, a move that has intensified concerns on Wall Street and in Washington about whether the independence of the Federal Reserve is facing its most direct challenge in decades.
Powell said federal prosecutors issued grand jury subpoenas tied to his June 2025 testimony before Congress, an extraordinary escalation in the long-running conflict between the central bank and Donald Trump's administration. The inquiry also touches on the Fed's roughly £2 billion ($2.5 billion) renovation of its Washington headquarters, though Powell argues the legal focus is misplaced.
In a statement published on the Federal Reserve's official website, Powell said subpoenas were served last Friday and warned that prosecutors are considering a possible criminal indictment related to his Senate Banking Committee testimony. He said the investigation reflects political pressure rather than substantive legal concerns.
"Those are pretexts," Powell said, characterising the probe as retaliation for monetary policy decisions driven by economic data rather than presidential demands. He cautioned that the action raises fundamental questions about whether interest-rate policy could be shaped through intimidation rather than evidence.
The White House and the Justice Department declined to comment in detail on the inquiry. Legal experts note that the opening of an investigation or issuance of subpoenas does not imply prosecution, and that securing a conviction for false congressional testimony requires proof that any misstatement was knowing and willful.
The confrontation follows months of mounting tension between Powell and President Trump, who has repeatedly criticised the Fed for declining to cut interest rates as aggressively as he has urged. Late last year, Trump publicly warned that he was considering legal action against Powell for "gross incompetence," an unusually direct rebuke of a sitting Fed chair.
The renovation project has become a focal point for critics inside the administration and on Capitol Hill. Approved in 2022, the project has drawn scrutiny over its cost and timeline, with some lawmakers questioning whether Powell accurately described its scope during congressional testimony. Powell has defended the project and his statements, saying the Fed complied with disclosure requirements.
"Public service sometimes requires standing firm in the face of threats," Powell said, reaffirming the Fed's mandate to pursue price stability and maximum employment without partisan influence. Powell has served under four presidential administrations.
Financial markets reacted swiftly following Powell's disclosure. The dollar weakened against major currencies, while gold prices rose as investors assessed the implications of potential political interference in U.S. monetary policy. Economists warned that perceived erosion of central-bank autonomy could undermine confidence in the world's largest economy.
Under U.S. law, a Fed chair can be removed only "for cause," a high legal threshold requiring evidence of serious misconduct. Powell has said he intends to remain in office through the end of his term in May 2026.
