Investigation of Fed Chair Powell draws bipartisan alarm and renewed defense of central bank independence

A Trump administration criminal investigation into Federal Reserve Chair Jerome Powell is drawing sharp criticism from economists, former Fed leaders, and lawmakers who argue it risks politicizing the nation’s central bank. The Associated Press reported that the probe—described as unprecedented for a sitting Fed chair—has intensified concerns about whether the White House is attempting to pressure the Fed into deeper interest-rate cuts.

At the center of the dispute is Powell’s congressional testimony regarding a roughly $2.5 billion renovation of the Federal Reserve’s headquarters. Powell has characterized the Justice Department’s subpoenas as a “pretext” for coercion, saying prosecutors have raised the specter of criminal indictments tied to statements about the renovation’s costs and design elements.

The controversy has prompted an unusually broad defense of Fed independence. According to the AP report, three former Fed chairs and a bipartisan group of economists issued a warning that central banks subject to political control tend to deliver worse outcomes—often producing higher inflation and weaker growth—because monetary policy becomes less credible.

Notably, pushback has also come from Republicans in the Senate. Some GOP senators who would play a key role in confirming a future Fed chair nominee criticized the investigation, with at least one saying he would oppose administration Fed nominees until the matter is resolved. That stance underscores the political and market sensitivity around perceived interference in monetary policy.

The timing adds stakes: Powell’s term as chair is set to end in May 2026, but he also holds a separate term as a Fed governor through January 2028. If he remains on the board, it could complicate efforts to reshape the Fed’s leadership quickly, keeping the independence debate—and the investigation’s fallout—on the front burner for investors and policymakers.