TL;DR
- Powell faces a criminal investigation by the Justice Department.
- The conflict with Trump centers on Fed interest rate policy.
- Bipartisan Senate opposition may stall the next Fed Chair confirmation.
Federal Reserve Chairman Jerome Powell confirmed he faces a criminal investigation by the U.S. Department of Justice. Powell issued a statement on Sunday night responding to the accusations. Authorities accuse him of misleading Congress about renovation work at the central bank’s headquarters in Washington. The renovation project includes asbestos removal.
This event places Powell in direct conflict with President Donald Trump. Both men had an unusual on-camera confrontation last summer. Powell labeled the Trump administration’s actions as “unprecedented” in his new statement. Powell argued the investigation has a political objective. The Fed Chairman stated the threat of criminal charges arises from setting interest rates based on technical assessments rather than the president’s preferences.
“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.”
Trump repeatedly criticized the Fed’s caution in reducing the cost of borrowing. The president regularly refers to Powell by the nickname “Too Late Jerome Powell.” Powell’s term concludes in the coming months. It is highly likely Trump will nominate a successor aligned with his economic policy preferences. This potential change carries broad ramifications for financial markets.
“Powell had no choice but to call out the president. This was a full frontal assault on Fed independence…. I have no idea how the markets will react, but we have entered a very dangerous period where it seems nothing is off-limits.”
Central Bank Independence Becomes the Battleground
Trump denied any involvement in the legal action against Powell. However, politicians from both parties expressed alarm. A key member of the Senate Banking Committee, Thom Tillis, stated the White House is attempting to undermine the Fed’s independence. Tillis promised to oppose the confirmation of any nominee for the Fed, including the next Chair, until this legal matter resolves.
Senator Elizabeth Warren, a vocal critic of the crypto industry, joined the condemnation. Warren claimed Trump is attempting a “corrupt takeover of our central bank.” The senator argued Trump abuses the law to make the Fed serve his interests and those of his friends. Warren urged the Senate not to move forward with “ANY Trump Fed nominee.”
The independence of a central bank is a fundamental principle. Without it, politicians can pressure for unsustainably low interest rates. Such policies often aggravate inflation later and lead to greater economic instability.
Historical examples from countries with central banks lacking independence, like Venezuela or Turkey, show episodes of hyperinflation. Some analysts, however, note the Federal Reserve also makes mistakes and lacks direct democratic legitimacy.
This weekend’s events could affect Bitcoin
The world’s largest cryptocurrency sometimes performs better in low interest rate environments, which favor riskier assets. The expectation of a Trump-loyal successor, like Kevin Hassett, had increased the odds of aggressive rate cuts in the second half of 2025. Now, the investigation against Powell could complicate or delay any Senate confirmation process, adding a layer of prolonged political uncertainty.
“The market has seen this before and doesn’t like it. It’s not about Powell at this point, it’s about the independence of the Fed. So when news like this hits, the knee jerk reaction is to sell off.”
Markets already showed volatility. Futures for the Dow Jones, S&P 500, and Nasdaq indexes fell before Monday’s opening. The dollar weakened and gold reached a record price. Market strategists like Jay Woods of Freedom Capital Markets indicated the initial sell-off reflects concern over Fed independence, more than Powell personally.
