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Federal Reserve Chair Jerome Powell has sharply criticised what he described as an “unprecedented” criminal investigation opened against him by the US Department of Justice (DoJ), warning that the independence of America’s central bank is under threat.
In a rare and forceful public intervention on Sunday, Powell revealed that federal prosecutors had served subpoenas on the Federal Reserve and threatened a criminal indictment over testimony he gave to a Senate committee regarding the renovation of Fed buildings.
Powell said he believed the investigation was triggered by former president Donald Trump’s anger over the Fed’s refusal to cut interest rates, despite sustained public pressure from the White House.
Trump, speaking separately, said he did not “know anything” about the investigation. The DoJ has not yet commented.
‘This is about central bank independence’
Calling the probe “unprecedented,” Powell framed the issue as one that goes beyond his own position.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether monetary policy will instead be directed by political pressure or intimidation,” he said.
While stressing his respect for the rule of law, Powell warned that the investigation must be viewed in the broader context of repeated threats and political pressure directed at the central bank.
“No one — certainly not the chair of the Federal Reserve — is above the law. But this action should be seen in the wider context of the administration’s ongoing pressure,” he added.
Until now, the long-running feud between Trump and Powell had largely been one-sided, with Trump previously branding the Fed chair “Mr Too Late” and a “numbskull” for resisting aggressive rate cuts.
Sunday’s statement marks the first time Powell has publicly and robustly pushed back.
Trump denies involvement, renews criticism
In an interview with punc Newspaper, Trump denied knowledge of the investigation but renewed his criticism of Powell’s leadership.
“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,” Trump said.
Janet Yellen: probe is ‘extremely chilling’
Former Fed chair Janet Yellen, who briefly served during Trump’s first term, described the investigation as “extremely chilling” and warned it could unsettle financial markets.
“Knowing Powell as well as I do, the odds that he would have lied are zero,” Yellen told CNBC. “I believe they’re going after him because they want his seat.”
She said the president’s desire for lower rates to reduce federal debt servicing costs risked politicising monetary policy.
“It is the road to a banana republic,” she added.
Dispute centres on Fed building renovations
The investigation relates to Powell’s testimony on the renovation of two Federal Reserve buildings — the Eccles Building and 1951 Constitution Avenue — the first major overhaul since their construction in the 1930s.
The project includes health and safety upgrades, such as removing asbestos and lead contamination. The Fed says the work will reduce long-term operating costs.
Trump has repeatedly criticised the project’s rising price tag, claiming it could reach $3.1bn (£2.3bn) — well above the Fed’s $2.5bn estimate.
Political fallout intensifies
Powell, who was nominated by Trump in 2017, is due to step down in May, with a successor expected to be named soon. However, the DoJ investigation may complicate that process.
Republican Senator Thom Tillis of North Carolina said he would oppose any Fed nominations until the legal matter is resolved.
“If there were any remaining doubt about efforts to undermine the Fed’s independence, there should now be none,” he said.
Democratic Senator Elizabeth Warren accused Trump of attempting to force Powell out permanently.
“The plan is to install another sock puppet to complete a corrupt takeover of America’s central bank,” she said.
Markets react cautiously
Despite the political shockwaves, US stock markets showed only a muted reaction on Monday.
- S&P 500 fell 0.2%
- Dow Jones Industrial Average slipped 0.4%
- Nasdaq was flat in early trading
However, precious metals surged amid heightened uncertainty.
- Gold jumped 2.5% to a record $4,624.53 per ounce
- Silver climbed 7.3% to an all-time high of $85.86 per ounce
Wider concerns over politicised prosecutions
Powell’s case adds to a growing list of clashes between Trump and institutional figures who later faced legal action. Previous prosecutions against political opponents — including former FBI director James Comey and New York Attorney General Letitia James — were dismissed by courts, with critics describing them as politically motivated.
Analysts warn that continued pressure on the Fed could erode confidence in its ability to act independently.
April Larusse of Insight Investment told the BBC that claims the Fed had “done nothing” on interest rates were unfounded, adding that political pressure appeared “unjustified”.
As scrutiny intensifies, both the credibility of the Department of Justice and the long-standing independence of the Federal Reserve now face serious questions.
