Powell Pushes Back as Trump-Era Probe Raises Fed Independence Concerns

Federal Reserve Chair Jerome Powell recently said a new criminal investigation into the central bank is a direct threat to its independence. He accused the Trump administration of using legal pressure to influence interest rate policy. This is the sharpest public response yet as tensions between the White House and the Fed resurface.

The US attorney for Washington, DC, opened a criminal investigation on Friday into the Federal Reserve’s headquarters renovation project, according to a report by The New York Times. The probe is examining whether Powell misled Congress about the scale and cost of the renovation.

Powell addressed the investigation on Sunday, saying it stems from the Fed’s refusal to follow political demands on interest rates. He said the central bank sets rates based on economic data and public interest, not presidential pressure.

The investigation comes after repeated criticism from President Donald Trump, who has accused the Fed of holding rates too high and slowing economic growth.

Trump’s Rate Pressure and Legal Threats

Trump has long attacked Powell for resisting rate cuts and has previously threatened to fire him. He also attempted to remove Fed Governor Lisa Cook over mortgage fraud allegations, a move later blocked by the Supreme Court.

Powell said the investigation must be viewed in the context of what he described as ongoing political pressure. While stating that no public official is above the law, he warned that the case could undermine the Fed’s ability to operate independently.

Powell’s term as Fed chair ends in May. He said the issue is no longer about a renovation project but about whether monetary policy decisions will be driven by economic conditions or political intimidation.

Trump denied involvement in the probe, telling NBC News he knew nothing about it. He repeated criticism of Powell’s leadership, saying the chair was “not very good at the Fed” and mocked the building project.

Succession Plans and Policy Implications

Trump has already begun positioning potential replacements for Powell. Several candidates have publicly supported lower interest rates. Kevin Hassett, a senior economic adviser to Trump, is widely seen as the leading contender. Hassett has said Trump’s views would carry “no weight” in Fed decisions, though markets remain skeptical.

The administration has already gained influence at the Fed. Stephen Miran, a close Trump ally, joined the board of governors last year and called for a 0.5% rate cut at his first meeting in December.