Powell Condemns DOJ Probe as Threat to Fed Independence

Federal Reserve Chairman Faces Political Pressure Amid Criminal Probe

Federal Reserve Chairman Jerome Powell has publicly criticized the Trump administration for its attacks on the central bank’s independence, citing a criminal probe as a direct result of the Fed’s refusal to lower interest rates earlier this year as President Donald Trump had demanded. In a statement released on Sunday, Powell addressed the situation with a rare level of directness, emphasizing that the Justice Department's actions were politically motivated.

Powell stated that the Justice Department served the Federal Reserve with grand jury subpoenas, which could lead to a criminal indictment related to his testimony before the Senate in June regarding renovations at the Fed’s headquarters. This project has faced significant cost overruns, but Powell dismissed these issues as mere pretexts for the investigation.

“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 wrote. He stressed that the probe was not about the renovations or his testimony, but rather about the Fed's independence and its ability to make decisions based on economic conditions rather than political pressure.

Powell highlighted his commitment to serving under both Republican and Democratic presidents without political bias, focusing on the Fed’s dual mandate of maintaining price stability and achieving maximum employment. “Public service sometimes requires standing firm in the face of threats,” he said. “I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.”

The statement came as reports emerged that the U.S. attorney’s office in the District of Columbia has launched a criminal investigation into Powell and whether he lied to the Senate Banking Committee about the scope of the renovation project, which had ballooned to $2.5 billion. Jeanine Pirro, a long-time Trump ally who oversees the D.C. federal prosecutors office, approved the probe, according to sources.

Trump, in response to the developments, told NBC News that he was unaware of the DOJ subpoenas. “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings,” he said, referring to Powell.

Economists have noted that while the market has consistently shrugged off threats to Fed independence, the cumulative effect of such pressures could eventually reach a breaking point. Christopher Hodge, chief U.S. economist at Natixis CIB Americas, warned that if Powell is implicated in the probe, the entire Fed board may be affected, undermining the institution’s credibility.

This latest attack on Powell and the Fed is part of a broader pattern of criticism from Trump, who pressured the central bank for months to lower interest rates sooner. When the Fed began easing rates in September, Trump pushed for even more aggressive cuts.

In addition to verbal attacks, Trump considered firing Powell and threatened to sue him over the renovation costs. He also attempted to remove Lisa Cook, a member of the Federal Reserve Board of Governors, after announcing her dismissal last year over alleged mortgage fraud. She has denied the accusations and challenged her firing, with the case now before the Supreme Court.

As Powell’s term as Fed chair expires in May, Trump has indicated he already has a replacement in mind. Potential candidates include Christopher Waller of the Federal Reserve Board of Governors, National Economic Council Director Kevin Hassett, and former Governor Kevin Warsh.

Despite the possibility of continuing as a Fed governor until 2028, previous Fed chairs typically stepped down when their terms ended. However, Powell’s strong stance against the Justice Department probe suggests he may not follow this tradition, making his future role at the Fed uncertain.