EditTrump administration’s criminal probe into Fed Chair sparks backlash over central bank independence
The move drew swift criticism, including from several members of the President's own Republican Party in Congress
In an unprecedented escalation of tensions between the White House and the U.S. Federal Reserve, the Trump administration has launched a criminal investigation into Federal Reserve Chair Jerome Powell.
The probe, which threatens potential indictment, centers on Powell’s congressional testimony about a costly renovation of the Fed’s headquarters – but Powell and critics describe it as a thinly veiled attempt to pressure the central bank into lowering interest rates in line with President Donald Trump’s demands.
The investigation marks a dramatic new chapter in Trump’s long-standing campaign to exert greater influence over the Fed, an institution designed to operate independently from political control. The Federal Reserve (often called “the Fed”) functions much like the European Central Bank or the Bank of England: it sets key interest rates, manages inflation, and supports economic stability. Its independence – protected by law and tradition – prevents presidents or governments from forcing short-term policy changes for political gain, such as cutting rates to boost growth before elections.
Trump, who first nominated Powell as Fed Chair in 2017, has repeatedly criticised him for not slashing interest rates aggressively enough, even though the Fed has reduced rates several times in recent years. This conflict has intensified in Trump’s second term, with threats to fire Fed officials, legal challenges (including a pending Supreme Court case over another governor), and now this criminal probe. Observers see these moves as part of a broader pattern where Trump seeks to centralize authority over traditionally independent institutions, drawing comparisons to authoritarian approaches in other countries that undermine institutional checks and balances.
The trigger: a $2.5 billion building renovation
The official focus of the Justice Department investigation is Powell’s testimony before the Senate Banking Committee in June 2025. During that hearing, Powell addressed cost overruns on a long-running project to renovate two historic Fed office buildings in Washington, D.C. The project, which began in 2021 (initially approved during Trump’s first term), was originally budgeted at around $1.9 billion but has ballooned to approximately $2.5 billion due to higher material and labour costs, design changes, and unforeseen issues like asbestos contamination and soil problems.
Powell maintained in his testimony that the increases were not due to luxury features and that the renovations would ultimately save money by consolidating operations. Critics, including Trump allies, have accused the Fed of mismanagement and misleading Congress.
On 10 January the Fed received grand jury subpoenas from the U.S. Department of Justice, threatening criminal charges related to that testimony. The probe was initiated by Jeanine Pirro, the U.S. Attorney for the District of Columbia – a longtime Trump ally and former Fox News host who was confirmed to the post in 2025. Sources indicate that top Justice Department officials, including Attorney General Pam Bondi, were not informed in advance.
Powell’s sharp rebuke
In a rare public video statement released Sunday evening, Powell pushed back forcefully. He described the subpoenas as part of “ongoing pressure” from the administration and insisted the renovation issues were mere “pretexts.”
“This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings,” Powell said. “It is not about Congress’ oversight role… Those are pretexts. 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 emphasized his respect for the rule of law while framing the action as an attack on the Fed’s core independence.
Widespread condemnation, even from Republicans
The move drew swift criticism, including from members of Trump’s own Republican Party in Congress. Senator Thom Tillis called it a “huge mistake” and vowed to block any Trump nominees to the Fed Board until the matter is resolved. Senator Lisa Murkowski warned that eroding Fed independence could damage market stability and the broader economy. Other Republican senators, including Kevin Cramer, Cynthia Lummis, and John Kennedy, expressed scepticism, with Kennedy quipping that the country “needs this like we need a hole in the head.”
Former Fed Chairs Janet Yellen, Ben Bernanke, and Alan Greenspan – along with other bipartisan economic experts – issued a joint statement comparing the situation to how monetary policy operates in “emerging markets with weak institutions,” warning of risks to inflation and economic health. International central bankers from France and Canada voiced support for Powell.
Treasury Secretary Scott Bessent reportedly told Trump the investigation had created a “mess” that could unsettle financial markets. House Speaker Mike Johnson, a Republican, said he would allow the process to “play out” without interference.
Trump, speaking to reporters, denied prior knowledge of the Justice Department’s actions, saying, “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.”
Pirro defended the probe, stating her office acted “based on the merits” after the Fed ignored requests to discuss the overruns.
Market reaction and broader implications
Financial markets showed unease on Monday: longer-term U.S. Treasury bond yields rose as investors weighed the risks of a less independent Fed leading to volatile policy. The U.S. dollar weakened, gold prices reached record highs, though major stock indexes still closed at records, buoyed by tech and retail sectors.
Powell’s term as Chair ends in May 2026, but he could remain on the Fed Board until 2028. Analysts suggest the pressure may strengthen his resolve to stay and resist political interference.
This episode highlights the stakes in the ongoing debate over central bank autonomy – a principle many democracies view as essential for stable, non-partisan economic management. As the investigation proceeds, it could test the limits of Trump’s power over one of America’s most important economic guardians.
With Reuters, edited by g.g.
Caption: US Federal Reserve Chair Jerome Powell attends a press conference at the Federal Reserve, Washington, DC USA, 10 December 2025. The Federal Reserve has announced interest rates has been cut by 0.25 points. EPA/WILL OLIVER
Updated: January 13, 2026 - 06:17
