Federal Reserve chair Jerome Powell is under criminal investigation relating to the testimony he gave to the Senate Banking Committee last June relating the the renovation of historic Federal Reserve office buildings.
In a statement late Sunday, Powell said that the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment. Officially, the investigation concerns what the Trump administration has called the "grossly mismanaged" $2.5 billion renovation project and Powell acknowledged in his statement that no one, not even the Fed, is above the law. But he claimed that the investigation has another motive.
"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," he said in his statement.
He further stated that the action was about whether the Fed would maintain its independence to set interest rates based on its economic assessments, or if monetary policy would be under political pressure or "intimidation."
The Fed chair said that he has served at the Federal Reserve under four administrations, Republicans and Democrats alike and "In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. 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."
A report by Reuters Monday quotes Goldman Sachs’ chief economist Jan Hatzius, who warned at the 2026 Goldman Sachs Global Strategy Conference that the criminal indictment threat against Powell only adds to worries about the central bank's independence.
“Obviously there are more concerns that Fed independence is going to be under the gun, with the latest news on the criminal investigation into Chair Powell really having reinforced those concerns,” Hatzius said.
Still, he expects the Fed will maintain its stated policy posture of making decisions based on data.
“I have no doubt that he (Powell) in his remaining term as chair is going to make decisions based on the economic data and not be influenced one way or the other, cutting more or refusing to cut on the back of data that could push in that direction,” Hatzius said.
This is an unfolding story and InvestmentNews will have further updates.
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