Federal Reserve Chair Jerome Powell said on Sunday that US federal prosecutors have launched a criminal investigation into him, marking an extraordinary escalation in tensions between the central bank and the White House.
In a move rarely seen from a sitting Fed chair, Powell publicly revealed that the US Department of Justice (DoJ) had issued subpoenas to the Federal Reserve and warned of a possible criminal indictment. The investigation relates to testimony Powell delivered before a Senate committee concerning renovations to Federal Reserve buildings.
Describing the inquiry as “unprecedented,” Powell said he believes it stems from President Donald Trump’s anger over the Fed’s refusal to cut interest rates, despite sustained and public pressure from the president.
Trump said he was unaware of the investigation. The DoJ has been contacted for comment.
Until now, the prolonged dispute between Trump and Powell has largely played out in one direction, with the president repeatedly attacking the Fed chair, branding him “Mr Too Late” and a “numbskull”.
Powell’s remarks on Sunday mark the first time he has forcefully and publicly responded, warning that the independence of the US central bank is now under threat.
“This is about whether the Federal Reserve will continue setting interest rates based on evidence and economic conditions,” Powell said, “or whether monetary policy will instead be dictated by political pressure or intimidation.”
He added: “I have deep respect for the rule of law and democratic accountability. No one — certainly not the chair of the Federal Reserve — is above the law. But this unprecedented action must be viewed in the broader context of this administration’s threats and sustained pressure.”
In an interview with NBC News on Sunday, Trump said he had no knowledge of the Justice Department’s investigation into Powell.
“I don’t know anything about it,” Trump said, adding: “But he’s certainly not very good at the Fed, and he’s not very good at building buildings.”
‘Extremely chilling’
Former Federal Reserve Chair Janet Yellen, who served for a year during Trump’s first term before being replaced by Powell, described the investigation as “extremely chilling” and warned that financial markets should be alarmed.
“Knowing Powell as well as I do, the odds that he would have lied are zero,” Yellen told CNBC. “I believe they are going after him because they want his seat and want him gone.”
“You have a president who says the Fed should cut rates to reduce interest payments on the federal debt,” she added. “This is the road to a banana republic.”
Yellen said the probe “shows the lengths to which the president is willing to go to get his way”.
The Federal Reserve is currently carrying out the first major renovation of two of its buildings — the Eccles Building and 1951 Constitution Avenue — since they were originally constructed in the 1930s.
The project includes extensive “overhaul and modernisation” work, including health and safety upgrades such as removing asbestos and lead contamination.
The Fed has said the renovations will lower long-term operating costs. However, Trump has repeatedly criticised the project, claiming it will cost $3.1bn (£2.3bn) — significantly higher than the Fed’s own estimate of $2.5bn.
Powell is the latest figure to clash with Trump before becoming the subject of a criminal investigation by the Justice Department.
Trump himself nominated Powell as Fed chair in 2017, during his first term as president.
Powell is scheduled to step down in May, and Trump is expected to name a successor by the end of this month.
Nomination uncertainty
However, the ongoing Justice Department investigation could complicate that process.
Republican Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, said he would block confirmation of Powell’s replacement — as well as any other Federal Reserve Board nominee — “until this legal matter is fully resolved”.
“If there was any lingering doubt that advisers within the Trump administration are actively working to end the Federal Reserve’s independence, there should be none now,” Tillis said in a statement.
He added: “It is now the independence and credibility of the Department of Justice that are in question.” Tillis is set to retire later this year.
Democratic Senator Elizabeth Warren said she believed Trump’s goal was to permanently remove Powell from the Fed and “install another sock puppet to complete his corrupt takeover of America’s central bank”.
“This committee and the Senate should not move forward with any Trump nominee for the Fed, including the Fed chair,” she said.
According to the New York Times, which first reported the investigation, the probe is being overseen by the US Attorney’s Office for the District of Columbia.
Trump has repeatedly threatened to remove Powell, criticising him for failing to cut interest rates as aggressively as the president wanted.
During the second half of 2025, the Fed cut interest rates three times.
Trump has consistently blamed former President Joe Biden and high interest rates for US inflation.
Critics warn that efforts to force out the Fed chair risk undermining the institution’s authority to set monetary policy independently of presidential influence.
April Larusse, head of investment specialists at Insight Investment, told the BBC’s Today programme: “It really isn’t true that the Federal Reserve has done nothing on interest rates, so this feels like pressure that isn’t particularly justified.”
Market reaction
The investigation into Powell, combined with continued unrest in Iran, triggered a surge in precious metal prices.
Gold — often viewed as a safe-haven asset during periods of uncertainty — rose 2.5% to $4,624.53 per ounce on Monday, a new all-time high.
Silver also reached a record level of $85.86 an ounce, climbing 7.3% on the day.
Despite Powell’s warning that the Fed’s independence is at risk, US markets showed limited reaction.
The S&P 500 fell 0.2%, the Dow Jones Industrial Average dropped 0.4%, and the tech-heavy Nasdaq remained flat in early trading.
Trump has previously pushed for prosecutions against political opponents in cases legal experts say are difficult to sustain.
He earlier targeted Lisa Cook, a Federal Reserve governor, attempting to remove her over alleged mortgage fraud. That case was blocked by a US federal court and is due to be heard by the Supreme Court later this month.
Criminal cases brought by Trump’s Justice Department against other political adversaries — including New York Attorney General Letitia James, who pursued a civil fraud case against Trump in 2024, and former FBI Director James Comey — were also dismissed by the courts.
Comey was accused of making false statements and obstructing justice. He was fired by Trump during his first term after overseeing an investigation into Russian interference in the 2016 presidential election, which Trump won against Hillary Clinton.
Both Comey and James have denied wrongdoing and said the prosecutions were politically motivated.
