Federal Reserve Chair Jerome Powell is at the center of a political and legal firestorm after federal prosecutors launched a criminal investigation into the central bank’s $2.5 billion renovation of its headquarters in Washington, DC. The probe, which the Federal Reserve confirmed on January 11, 2026, marks a dramatic escalation in the ongoing tensions between President Donald Trump and Powell, with the independence of America’s top monetary authority now in the spotlight.
According to reports from The New York Times, Axios, and CNN, the Justice Department’s inquiry focuses on the ballooning costs of renovating two historic buildings on the National Mall. The price tag for the project has swelled to $2.5 billion, a figure that has drawn scrutiny from lawmakers and the White House alike. Powell, however, has repeatedly denied that luxury features or unnecessary upgrades are to blame for the surge in costs—a point he made clear during his testimony before Congress in June 2025.
The investigation took a sharp turn early in January 2026, when the Federal Reserve received grand jury subpoenas threatening a possible criminal indictment. Powell, in a rare and forceful public statement released on January 11, cast the probe as a thinly veiled attack on the Fed’s independence, calling it “a blatant assault” on the central bank’s ability to set monetary policy free from political interference.
“No one—certainly not the chair of the Federal Reserve—is above the law,” Powell said in a video statement issued by the Fed. “But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.” He went on to argue, “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. 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’s comments struck a defiant tone, underscoring the high stakes of the confrontation. “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. The White House, when asked for comment, referred inquiries to the Justice Department, which did not immediately respond.
President Trump, for his part, has publicly distanced himself from the Justice Department’s actions. Speaking to NBC News on January 11, Trump insisted he was unaware of the probe and denied that it had anything to do with his repeated calls for lower interest rates. “No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got,” Trump said. Despite the president’s denials, the timing and context of the investigation have fueled speculation about whether political motives are at play.
Trump’s campaign against Powell has been anything but subtle over the past year. Throughout 2025, the president threatened on multiple occasions to fire Powell, citing frustrations with the Fed’s approach to both interest rates and the building renovation. In July 2025, Trump and Powell even made a joint appearance at the Federal Reserve to review the renovation’s cost figures, a moment captured by The Washington Post. Over the summer, Trump visited the construction site alongside White House officials and Powell, making it clear that the issue was on his radar.
The new criminal investigation brings those tensions back into sharp relief. Treasury Secretary Scott Bessent, a top Trump appointee and vocal advocate for lower rates, said just last week that news of Powell’s replacement could come as soon as January 2026. Top White House economist Kevin Hassett, a longtime Trump loyalist, is rumored to be a leading candidate for the Fed chairmanship. However, even if Trump makes a new appointment, Powell could remain on the board of governors until his term expires in 2028—meaning he may continue to play a significant role in monetary policy for years to come.
The investigation is already shaping the political landscape in Congress. Senator Thom Tillis, a North Carolina Republican who sits on the influential Senate Banking Committee, announced on January 11 that he would oppose the confirmation of any nominee for the Fed—including the upcoming chair vacancy—until the legal matter is fully resolved. “I will oppose the confirmation of any nominee for the Fed— including the upcoming Fed Chair vacancy—until this legal matter is fully resolved,” Tillis said in a statement. Given that Republicans hold just a two-seat majority on the committee, even a single defection could derail any nomination.
All of this is unfolding against a backdrop of economic uncertainty. The Federal Reserve cut interest rates three times in the second half of 2025, aiming to shield a weakening labor market. Still, inflation has remained stubbornly above the Fed’s 2% target, complicating the central bank’s path forward. Powell has suggested that any further rate cuts will be considered cautiously, given the persistent inflationary pressures. Trump, meanwhile, has made no secret of his desire for rates to be slashed to “rock-bottom levels”—a stance he says the next Fed chair must embrace.
The renovation project itself, involving two historic buildings on the National Mall, has become a symbol of the broader clash between the White House and the central bank. While the Fed maintains that all expenditures have been above board and that Congress has been kept informed through testimony and public disclosures, critics point to the ballooning costs as evidence of mismanagement. Powell has steadfastly denied that luxury features or excessive spending are to blame, reiterating in both congressional testimony and public statements that the project’s scope was necessary to preserve the integrity of the historic facilities.
As the legal and political drama unfolds, the stakes for America’s economic future are enormous. The outcome of the investigation could shape not only the fate of Powell and the Fed’s leadership but also the central bank’s ability to operate independently at a time of mounting global uncertainty. With Powell’s term as chair set to expire in just four months, and his future on the board still uncertain, all eyes will be on Washington as the battle over the Fed’s independence—and the direction of U.S. monetary policy—continues to intensify.
For now, the Federal Reserve finds itself in uncharted territory, its leader under criminal investigation, and its very independence hanging in the balance. The coming months promise to be pivotal, not just for Powell and Trump, but for the future of the American economy itself.
