U.S. Justice Department criminal probe intensifies tensions around Fed Chair Powell

The U.S. Department of Justice (DOJ) has opened a criminal investigation into Federal Reserve Chair Jerome Powell, marking a rare and controversial escalation in the long-running friction between the central bank and the executive branch. Prosecutors have served grand jury subpoenas to the Federal Reserve related to Powell’s June 2025 testimony to Congress about the cost and scope of renovations at the Fed’s Washington, D.C., headquarters. Powell has publicly described the investigation as an attempt to undermine the Fed’s independence in setting interest rates. 

What’s driving the probe

The investigation centres on whether Powell made false or misleading statements to Congress about the cost overruns on the renovation project, which has grown from an early estimate of around $1.9 billion to at least $2.5 billion. Prosecutors allege that Powell’s testimony may have omitted or misstated key details about the project’s features and budget, although the Federal Reserve maintains that cost increases were due to materials, labour, and unexpected hazards like asbestos. 

Powell has said the move is unprecedented and politically motivated, arguing that it is connected to ongoing pressure from President Trump and his allies for the Fed to enact much deeper interest rate cuts than Powell and his colleagues have been willing to support. 

White House messaging and Kevin Hassett’s stance

Top White House economic adviser Kevin Hassett has played down the investigation publicly, suggesting there is “nothing to see” and framing the DOJ’s action as a routine matter rather than evidence of wrongdoing. He acknowledged the need for transparency about the renovation costs while stating confidence that the controversy will not produce substantive charges. Reuters reporting confirms that Hassett defended the probe and stressed that it should not be viewed as undermining Powell personally, even as he highlighted concerns about communication around the project. 

Broader reaction and implications

The investigation has drawn criticism across political lines and from leading economists and former central bankers, who see it as a threat to the institutional independence of the Federal Reserve — a cornerstone of U.S. monetary policy. A joint statement from all three living former Fed chairs and several former Treasury secretaries warned that using prosecutorial tactics against a sitting Fed chair is “unprecedented” and could have chilling effects on central bank decision-making. 

Senators from both parties have expressed concern that the probe risks politicising the central bank’s role, which is designed to set policies like interest rates based on economic data rather than political pressure. Some GOP lawmakers, including Senator Lisa Murkowski, have called for congressional oversight of the DOJ’s actions in this matter. 

No charges yet; markets and policy independence in focus

As of mid-January 2026, no criminal charges have been filed against Powell, and the investigation remains active. Analysts note that opening an investigation or issuing subpoenas does not guarantee indictment; proving false statements to Congress requires clear evidence of knowing and willful misrepresentation. 

The controversy has raised concerns among investors about potential instability in monetary policy if the Fed’s independence is perceived to be compromised. Central banks’ freedom to make decisions based on economic conditions rather than political dictates is considered foundational to credible inflation control and financial stability — a principle stress-tested by this high-profile inquiry.