Federal prosecutors have opened a criminal investigation into Jerome Powell, officially linked to the renovation of the Fed headquarters but perceived as an attack on its independence.
Explosive Implications of a Criminal Investigation
A political threshold has been crossed in Washington. Federal prosecutors have opened a criminal investigation targeting Jay Powell, the Federal Reserve’s chairman, regarding a $2.5 billion renovation project of the institution’s headquarters. An unprecedented initiative comes amid open confrontation between the White House and the central bank.
According to Jay Powell, the Fed received grand jury subpoenas on Friday, accompanied by an explicit threat of indictment. The formal focus of the investigation is his testimony before Congress last summer regarding the Federal Reserve’s headquarters renovation, a project that significantly exceeded its initial budget.
But for Powell, the stakes go far beyond real estate matters. In a video statement, he denounced the action as “unprecedented,” seen as a pretext to challenge the central bank’s independence. The message is clear: this investigation is a direct consequence of the Federal Reserve’s refusal to comply with political pressure for massive rate cuts.
The Standoff Over Interest Rates in the Background
For months, Donald Trump has been launching attacks on the Fed chairman, accusing him of artificially slowing down growth by maintaining high-interest rates. The president publicly demanded a quick return to around 1% interest rates, labeling Powell as responsible for unnecessarily harsh monetary tightening.
Jay Powell responded head-on. He stated that the threat of criminal charges stems from the fact that the Fed sets its monetary policy based on what it believes is in the public interest, not according to the executive branch’s preferences. He also affirmed that he would not resign, despite the pressure, citing his duty to public service.
Immediate Market Reactions
The investigation announcement caused shockwaves in the financial markets. Gold hit a new all-time high, climbing nearly 2% to surpass $4,600 per ounce, a common occurrence when the Fed’s independence is perceived as threatened.
The dollar fell around 0.5% against a basket of currencies, while US stock futures lost ground. Bond yields also reacted, as investors began factoring in an increased risk of inflationary drift if the credibility of monetary policy were to be weakened. Bitcoin, on the other hand, hesitated, initially bouncing above $92,000 before dropping to $90,500.
A Growing Institutional Concern
Several economists and former monetary officials have labeled the investigation as deeply concerning development. The notion that a government could use the judicial system to influence monetary policy challenges a fundamental pillar of the American financial system.
In Congress, some Republican voices are starting to raise alarms. Senators warned that this issue could block the nomination of Powell’s successor until the matter is clarified.
A Significantly Consequential Precedent
Jay Powell is set to leave office in May. But the issue transcends his person. It raises a central question for global markets: how far is the US executive willing to go to regain control over monetary policy?
If political pressure were to intensify, investors might demand a higher risk premium on American assets. This already explosive matter could become one of the major breaking points between political power and financial stability in 2026.
