Federal Reserve Chair Jerome Powell has found himself at the center of a storm that’s shaking the very foundation of America’s financial system. On January 11, 2026, Powell confirmed that he is the subject of a criminal investigation launched by the U.S. Department of Justice, a move that has sent shockwaves through financial markets and ignited fierce debate over the independence of the nation’s central bank.
In a rare and somber video address released by the Federal Reserve on Sunday, Powell revealed that federal prosecutors had served the agency with subpoenas related to his testimony before Congress earlier in 2025. The focus: a multi-year, $2.5 billion renovation of the Federal Reserve’s Washington, DC headquarters—a project that has drawn criticism for significant cost overruns. But Powell didn’t mince words about what he believes is really at stake. “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,” he said, according to ABC News and Al Jazeera.
The probe, which is being overseen by the U.S. Attorney’s Office for the District of Columbia, stems from accusations that Powell made false statements to the Senate Banking Committee about the renovation. The allegations were brought to the Department of Justice by House Republican Rep. Anna Paulina Luna of Florida, who sent a criminal referral last July. Luna accused Powell of misleading lawmakers over the project’s ballooning costs. The Fed, for its part, has attributed the overruns to unforeseen cost increases, maintaining that the renovations will ultimately save money by consolidating operations, as reported by the central bank’s website and multiple outlets.
While the investigation’s official focus is on the renovation, Powell made it clear he sees a broader campaign to undermine the Fed’s autonomy. “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 stated in his video message, as cited by Al Jazeera. He added, “Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.”
The backdrop to all this is a months-long tussle between Powell and President Donald Trump. Trump has repeatedly pressured Powell to lower interest rates more aggressively, even going so far as to threaten his removal. In July 2025, Trump and Powell donned hard hats to tour the Fed’s renovation project, with the president publicly criticizing the costs. During a press exchange, Trump alleged that the renovation’s expenses were even higher than reported, prompting Powell to correct him on the spot, clarifying that Trump had mistakenly included costs from a previous project.
Trump’s pressure campaign hasn’t stopped at Powell. The president has also sought to remove Lisa Cook, a fellow Fed board governor, and has publicly lambasted Powell’s stewardship of both monetary policy and the renovation. In a recent interview with NBC News, Trump denied any involvement in the DOJ investigation, saying, “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.” He added, “What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got. He’s hurt a lot of people. I think the public is pressuring him.”
This escalating clash has drawn strong reactions from both sides of the political aisle. Senator Thom Tillis, a Republican from North Carolina and member of the Senate Banking Committee, declared on January 11 that he would oppose any Federal Reserve nominee’s confirmation until the legal case against Powell is resolved. “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said in a statement shared by the BBC and Al Jazeera. “It is now the independence and credibility of the Department of Justice that are in question.”
Democratic Senator Elizabeth Warren went even further, accusing Trump of orchestrating a “corrupt takeover” of the central bank. “He is abusing the law like a wannabe dictator so the Fed serves him and his billionaire friends,” Warren posted on social media, according to Al Jazeera and the BBC. “The Senate must not move ANY Trump Fed nominee.”
The financial markets responded swiftly to the news. U.S. stock futures tied to the S&P 500 fell more than 0.4% in Asian trading, while the U.S. dollar slipped about 0.2% against major currencies, as reported by Al Jazeera. Meanwhile, gold—a traditional safe haven in times of uncertainty—jumped 1.4% to $4,572.36 per ounce, hitting a record high, and silver prices also surged before easing slightly, according to the BBC.
Powell, who has served as Fed Chair since 2018 after being nominated by Trump himself, is set to step down from the top role in May 2026. However, his term as a member of the Board of Governors runs until January 2028. The looming vacancy has already sparked speculation about Trump’s next move. He is expected to name his pick for the next Fed Chair within weeks, with Kevin Hassett, head of Trump’s National Economic Council and a proponent of deeper rate cuts, widely tipped for the nomination. The choice, however, must be confirmed by the Senate—a process now fraught with political tension.
For those watching from the outside, the broader implications are hard to ignore. David Wilcox, a senior fellow at the Peterson Institute for International Economics, told Al Jazeera, “Much to the president’s frustration, the legislative architects of the modern Fed turn out to have been good at their craft. They meant to allow the Fed to set monetary policy one step removed from political control, and, so far, their safeguards have stood up under pressure. In response, the president has resorted to increasingly outlandish tactics. This one is the most extreme example yet.”
April Larusse, head of investment specialists at Insight Investment, offered a more tempered perspective on the BBC’s Today programme: “It really isn’t the case that the Federal Reserve has been doing nothing on interest rates so this does feel like perhaps it is pressure that isn’t really justified.” She acknowledged, though, that “for people at the lower end of the income spectrum things have been difficult—inflation was very high, wages were not keeping up with inflation—and so there is a big part of the US population that frankly is still suffering with a cost of living crisis.”
As the criminal probe into Powell unfolds, the independence of the Federal Reserve—long viewed as a cornerstone of America’s economic stability—faces one of its most serious tests in decades. With financial markets on edge and political tempers flaring, all eyes are now on Washington to see whether the central bank can weather this storm and maintain its hard-won autonomy.
