The head of the U.S. Federal Reserve, Jerome Powell, publicly indicated that he does not view the Justice Department’s investigation as a routine legal procedure, but rather as a continuation of political pressure on the central bank. According to him, what is happening fits into the long-standing conflict over interest rates and the Fed’s independence.
The situation is escalating as his term is set to end in 2026 and active discussions are underway regarding the next head of the regulator.
What Is Known About the Investigation
According to Powell, at the end of last week the Federal Reserve received subpoenas from a grand jury issued by the U.S. Department of Justice. The documents concern testimony he gave to the Senate last year, as well as the large-scale reconstruction of the Fed’s headquarters in Washington.
The project is worth about $2.5 billion. Powell emphasized that information about the renovation has been repeatedly disclosed in official reports and during Congressional hearings. In his view, the project itself is being used only as a formal pretext.
He called the situation unprecedented for American practice and linked the prosecutor’s activity to long-standing dissatisfaction within the administration over the regulator’s monetary policy.
Rate Dispute Takes Center Stage
The Fed chair directly stated that threats of criminal prosecution emerged as the central bank refused to adjust interest rates to meet political expectations.
According to him, the key question now is whether the Federal Reserve will continue to make decisions based on economic data and analysis, or whether monetary policy will fall under the influence of pressure and intimidation.
In the second half of 2025, the Fed cut rates three times. The latest decision in December lowered the range to 3.50–3.75%. At the same time, the regulator ended its quantitative tightening program. Despite this, criticism from the White House did not subside.
Trump’s Position: Denial and Criticism
President Donald Trump, who returned to the White House in January 2025, repeatedly accused Powell of being overly cautious. He openly said that rates should be cut much faster and deeper.
However, commenting on the situation in an interview with NBC, Trump said he was not aware of any investigation into the Fed. He denied any connection between the Justice Department’s actions and monetary policy.
At the same time, the president did not miss the opportunity to once again criticize the head of the regulator, questioning both his economic decisions and his management of the construction project.
Who Could Lead the Fed After Powell
Powell’s term ends in May 2026. Against this backdrop, the White House is already preparing for a change in central bank leadership. According to U.S. media, the president’s shortlist currently includes four candidates:
- Kevin Hassett
- Kevin Warsh
- Christopher Waller
- Rick Rieder
Trump has previously stated that the next Fed chair should be an advocate of significantly lower interest rates. This increases market concerns that the regulator’s independence could come under pressure.
Why the Situation Matters for Markets
The conflict between the White House and the Fed goes beyond personal disagreements. It directly affects trust in the institution, which plays a key role in the global financial system.
Any hint of political interference in the central bank’s work can:
- increase volatility in bond markets
- affect the dollar’s exchange rate
- change expectations for inflation and rates
For investors, this is a signal of heightened uncertainty, especially on the eve of a change in Fed leadership.
What Happens Next?
So far, the investigation is at an early stage, and no direct charges have been brought against Powell. However, the very fact of a public conflict between the Fed chair and the U.S. administration has already become a serious precedent.
In the coming months, markets will closely monitor the development of the situation. The outcome of this story could affect not only Powell’s fate, but also the balance of power between political authorities and independent financial institutions in the U.S.
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