Trump administration opens criminal probe into Fed chair, rattling central bank independence

United States President Donald Trump’s administration has opened a criminal investigation into Federal Reserve Chair Jerome Powell, a move that is intensifying fears that political pressure is closing in on the heart of US monetary policy.

Powell said on Sunday that the US Department of Justice had served the Federal Reserve with subpoenas linked to testimony he gave to Congress about the $2.5bn renovation of the central bank’s headquarters in Washington, DC.

He described the scrutiny of the refurbishment project as a pretext.

“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 said in a rare video address. “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.”

Powell said he has carried out his role “without political fear or favour”, guided solely by the Fed’s dual mandate of price stability and 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.”

Trump has repeatedly attacked Powell for refusing to cut interest rates more aggressively and is already locked in a legal fight to remove another Fed governor, Lisa Cook, after ordering her dismissal in August.

The administration and its allies have also zeroed in on the cost overruns tied to the Fed’s renovation. In July, Bill Pulte, a Trump appointee who heads the Federal Housing Finance Agency, urged Congress to investigate Powell for alleged “political bias” and “deceptive” testimony about the project.

Markets reacted quickly to Powell’s disclosure. US stock futures slipped, with S&P 500-linked contracts down more than 0.4 percent in early Asian trading. The dollar weakened about 0.2 percent against major currencies.

Trump, for his part, denied any knowledge of the investigation.

“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 told NBC News.

Under US law, a president may only remove a Fed chair “for cause”, a safeguard widely understood to protect the central bank from dismissal over policy disagreements.

Powell has served as Fed chair since 2018 and is due to step down from the top job in May, though his term as a governor runs until January 2028.

Trump, who has said that anyone who disagrees with him is unfit to lead the central bank, is expected to announce his preferred successor within weeks.