Justice department opens investigation into Jerome Powell as Trump ramps up campaign against Federal Reserve
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The independence and credibility of America’s central bank is under threat after the Department of Justice opened a criminal investigation into Federal Reserve chair Jerome Powell, knocking the US dollar.
In a startling development, US prosecutors have launched a criminal investigation into Powell over a $2.5bn renovation of the Federal Reserve’s headquarters, and into his testimony about the project to the Senate banking committee in June last year.
The move is a dramatic escalation in the long-simmering tensions between the Fed and the Trump White House, with the US president repeatedly rubbishing Powell for not cutting interest rates more quickly.
After news of the investigation broke last night, Powell came out fighting, insisting that he had been threatened with criminal charges because the Fed had set interest rates “based on our best assessment of what will serve the public, rather than following the preferences of the president”.
Powell’s term as chair expires in May, and Trump was already expected to appoint a more malleable successor who might lower borrowing costs.
The news that Powell is under criminal investigation has only heightened concerns that his successor could set policy for political, not monetary, reasons.
Michael Brown, senior research strategist at brokerage Pepperstone, warns that institutional confidence in the US is again called into question.
In a classic Trumpian distraction and bullying tactic, the President has upped the ante in his long-running feud with Fed Chair Powell, after the DoJ sent subpoenas to the Fed, ostensibly in relation to Powell’s testimony on renovations to the Eccles Building last year.
Let’s call a spade a spade though. This is nothing to do with building renovations, even if it would be quite ironic for a serial bankrupt property developer to try and pursue that path. Instead, it’s Trump acting like little more than a petulant child, throwing a strop yet again because he hasn’t got his own way, in this instance lower interest rates. This isn’t a construction case, but one that strikes at the very heart of Fed policy independence.
Key events
Powell inquiry is “low point” in Trump presidency
The inquiry into Powell “is a low point in Trump’s presidency and a low point in the history of central banking in America,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania.
Conti-Brown added (via Reuters)
“Congress did not design the Fed to reflect the president’s daily fluctuations, and because the Fed has rebuffed President Trump’s efforts to take the Fed down he is launching the full weight of American criminal law against its Chair.”
Donald Trump told NBC News last night that he had no knowledge of the Justice Department’s actions.
The president threw in a couple of barbs at Jerome Powell, 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.”
Republican senator: Trump advisors are pushing to end Fed independence
The criminal investigation into Jerome Powell had had an immediate fallout.
Republican Senator Thom Tillis, a member of the Senate Banking Committee that vets Presidential nominees for the Fed, has vowed to oppose any Trump nominees, including the coming choice of successor to Powell as chair, “until this legal matter is fully resolved.”
Tillis warned that the threatened indictment puts the Department of Justice’s “independence and credibility” in question.
Posting on X, Tillis warns:
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.
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. It is now the independence and credibility of the Department of Justice that are in question.
I… https://t.co/wDMH6twcD5— Senator Thom Tillis (@SenThomTillis) January 12, 2026
Gold hits $4,600 an ounce
Gold has hit a new high around $4.600 an ounce; it’s up over 1.5% today, pushed up by the weaker dollar.
Dollar falls
The US dollar has dropped on the foreign exchange markets since news of the investigation into Powell hit the wires.
The dollar index, which tracks the greenback against a basket of currencies, is down 0.2% this morning.
This is lifting sterling; the pound has gained almost half a cent against the dollar to $1.3440.
The dollar’s weakness highlights concerns that Fed independence is at risk:
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
Powell highlighted that the key issue is whether the Fed can continue setting interest rates based on economic data and evidence, or whether monetary policy will be directed by political pressure.
I’m afraid we may be moving toward the second scenario. If the Fed becomes a political tool, with its chair replaced by a government puppet, that could further weaken appetite for the U.S. dollar and U.S. bonds.
Jerome Powell’s statement
Here’s the statement issued by Jerome Powell, in a video address, last night:
Good evening.
On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.
I have deep respect for the rule of law and for accountability in our democracy. No one—certainly not the chair of the Federal Reserve—is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.
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.
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.
I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. 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.
Thank you.
Gita Gopinath, former First Deputy Managing Director at the IMF, has applauded the statement…
… as has Jason Furman, former chair of the US Council of Economic Advisers:
A terrific statement from a true statesman.
I am grateful for everything Chair Powell is doing to resist this outrageous attempt by the President to use lawfare to subvert the Fed’s responsibility to pursue the objectives set for it by law—maximum employment and price stability. https://t.co/dfSq5YjN96
— Jason Furman (@jasonfurman) January 12, 2026
Justice department opens investigation into Jerome Powell as Trump ramps up campaign against Federal Reserve
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The independence and credibility of America’s central bank is under threat after the Department of Justice opened a criminal investigation into Federal Reserve chair Jerome Powell, knocking the US dollar.
In a startling development, US prosecutors have launched a criminal investigation into Powell over a $2.5bn renovation of the Federal Reserve’s headquarters, and into his testimony about the project to the Senate banking committee in June last year.
The move is a dramatic escalation in the long-simmering tensions between the Fed and the Trump White House, with the US president repeatedly rubbishing Powell for not cutting interest rates more quickly.
After news of the investigation broke last night, Powell came out fighting, insisting that he had been threatened with criminal charges because the Fed had set interest rates “based on our best assessment of what will serve the public, rather than following the preferences of the president”.
Powell’s term as chair expires in May, and Trump was already expected to appoint a more malleable successor who might lower borrowing costs.
The news that Powell is under criminal investigation has only heightened concerns that his successor could set policy for political, not monetary, reasons.
Michael Brown, senior research strategist at brokerage Pepperstone, warns that institutional confidence in the US is again called into question.
In a classic Trumpian distraction and bullying tactic, the President has upped the ante in his long-running feud with Fed Chair Powell, after the DoJ sent subpoenas to the Fed, ostensibly in relation to Powell’s testimony on renovations to the Eccles Building last year.
Let’s call a spade a spade though. This is nothing to do with building renovations, even if it would be quite ironic for a serial bankrupt property developer to try and pursue that path. Instead, it’s Trump acting like little more than a petulant child, throwing a strop yet again because he hasn’t got his own way, in this instance lower interest rates. This isn’t a construction case, but one that strikes at the very heart of Fed policy independence.
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