By any historical measure, the Federal Reserve has weathered storms before. Wars, financial crises, inflationary spirals, political attacks – all of these have battered the institution that sits at the heart of the world’s largest economy. But the confirmation on Sunday evening that the chair of the U.S. central bank, Jerome Powell, is now the subject of a criminal investigation marks a new and potentially dangerous chapter.
According to Powell, the Office of the U.S. Attorney for the District of Columbia is examining whether he misled Congress about the scale and cost of renovation works at the Fed’s headquarters in Washington. The project’s price tag ballooned far beyond initial estimates, triggering scrutiny that has now escalated into a formal probe. Powell disclosed that the Federal Reserve has received a subpoena from the Department of Justice.
At first glance, the case appears technical: Did the Fed chair accurately report the scope of the renovations? Were lawmakers given complete information about the final costs? Yet the political reverberations are anything but technical. Critics across party lines have voiced concerns, while former president Donald Trump has publicly denied any responsibility for the investigation – even as he continues to attack Powell over interest-rate policy.
For many observers, the timing is suspicious. The Fed cut its benchmark interest rate for the third time, a move that is already controversial within the central bank itself. Monetary policymakers are split between fears of reigniting inflation and worries about slowing growth. Against this backdrop, the investigation is being read less as a narrow legal matter and more as part of a broader campaign to exert pressure on the institution that controls the nation’s money supply.
Powell wasted no time in rejecting the allegations. In a video statement, he emphasized his “great respect for the rule of law and accountability in our democracy”, adding that no one – including the chair of the Federal Reserve – stands above the law. But he also described the case as a pretext that must be viewed in the context of sustained political threats and pressure.
In his words, “The threat of prosecution is a consequence of the Federal Reserve setting interest rates in the public interest, not according to the preferences of the president”. He pledged to continue executing his duties “with integrity and in the service of the American people”.
That framing resonates with economists who see a deeper problem. Ulrich Kater, chief economist at DekaBank, the asset manager of Germany’s savings banks, captured the stakes in blunt terms. Central banks, he noted, have the power to create money “with the push of a button”. In today’s digital financial system, they no longer need printing presses; most money is created electronically. It is precisely this immense power, he argued, that makes independence from day-to-day politics indispensable.
“Politicians”, Kater warned, “are all too tempted to use the power of money creation for their own programs, without regard for the devastating long-term consequences of inflation”. That temptation, he said, is why monetary authorities must remain separated from the political process.
From this perspective, the investigation into Powell is not merely about one individual’s testimony before Congress. It is about disciplining an institution. The Federal Reserve is one of the few pillars of U.S. governance designed to operate at arm’s length from electoral politics. Its mandate – maintaining price stability and supporting maximum employment – requires long-term thinking that often conflicts with the short-term incentives of politicians.
ZDF business expert Valerie Haller put it succinctly: “The independence of the Fed is a golden rule”. Break that rule, and the consequences could reverberate far beyond Washington.
This is hardly the first time the Fed has clashed with political leaders. The history of the institution is littered with episodes in which presidents tried to bend monetary policy to their will. What feels different today is the intensity and persistence of the pressure. Former president Trump repeatedly lambasted Powell for not cutting rates aggressively enough during his term. He now denies any role in the current probe, but few in financial circles believe the conflict has faded.
The issue extends well beyond the United States. Christine Lagarde, president of the European Central Bank, recently warned of a global trend toward increased political interference in central banking. Without naming the U.S., she cited evidence that political influence over monetary decisions contributes significantly to economic volatility.
While legal frameworks guaranteeing central bank independence are, on paper, more widespread today than ever before, Lagarde cautioned that “actual independence” is being challenged in multiple regions of the world. Laws alone, in other words, do not protect institutions if political norms erode.
Skeptics of central bank autonomy often portray it as an undemocratic anomaly: How can the management of money – one of the most powerful levers of economic policy – be insulated from elected representatives? The answer lies in results. Independent central banks have, over decades, delivered lower inflation and more stable growth than systems where politicians directly control the printing press.
This is why the current investigation is being watched with such unease. If senior central bankers come to believe that unpopular but necessary policy decisions could expose them to legal retaliation, a subtle but corrosive form of self-censorship may take hold. Interest-rate decisions might begin to reflect political survival rather than economic analysis.
Powell insists he will not be deterred. Yet the mere existence of a criminal probe into a sitting Fed chair is unprecedented in modern U.S. history. It forces Americans to confront an uncomfortable question: Is the country still capable of protecting the institutions that safeguard long-term economic stability from short-term political battles?
The renovation costs at the heart of the case may ultimately prove to be a genuine administrative failure, or they may be dismissed as an overblown technicality. But the broader implications will linger. At stake is not just the reputation of Jerome Powell, but the credibility of the Federal Reserve itself – and with it, confidence in the dollar, U.S. Treasury bonds, and the role of the United States as the anchor of the global financial system.
In an era of trade conflicts, rising debt, and geopolitical fragmentation, the world can ill afford a politicized central bank in Washington. Whether this investigation is remembered as a necessary act of accountability or as the moment when the Fed’s independence began to fracture will depend on how the coming months unfold. What is already clear is that the pressure on America’s most powerful financial institution has rarely been greater.
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