The U.S. Attorney's office for the District of Columbia has launched a criminal investigation into Federal Reserve Chair Jerome Powell, focusing on the renovation of the central bank's Washington headquarters. The investigation centers around whether Powell accurately characterized the scope and cost of the renovation project during his congressional testimony.
The probe includes an analysis of Powell's public statements and spending records related to the Federal Reserve headquarters renovation. The renovation of the Federal Reserve's two main office buildings in Washington's Foggy Bottom neighborhood is estimated to cost $2.5 billion. The project is being funded by the central bank itself, not by taxpayers. The Fed is self-financing and does not rely on congressional appropriations to cover its operating expenses, which include employee salaries, facilities maintenance, and the current renovation. Its primary income comes from interest earned on government securities and fees charged to financial institutions. The project is scheduled for completion in the fall of 2027, with Washington-based employees expected to begin occupying the building in March 2028.
Powell has accused the Justice Department of using the threat of criminal prosecution to pressure the central bank to lower interest rates. He described the newly issued grand jury subpoenas as an unprecedented challenge to the Fed's independence. Powell stated that the threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on their best assessment of what will serve the public, rather than following the preferences of the President.
The investigation represents a new avenue of pressure from the Donald Trump administration on Powell, who the president has repeatedly attacked for resisting his demands to bring down interest rates sharply. Trump had also raised the possibility of fraud in the Fed's recent renovation of its headquarters, allegations that Powell denied. Trump has previously threatened legal action over the renovations and mocked the project's cost and design.
Powell has faced increasing political pressure, with criticism focused on the central bank's expensive renovation of its Washington headquarters and broader White House frustration over the pace of rate cuts. In mid-2025, Powell asked the Fed's inspector general to take a fresh look at the renovation project costs amid intensifying attacks from Trump administration officials and Republican lawmakers.
Powell has consistently resisted rapid rate cuts, citing risks to the labor market. He has addressed the challenge of balancing between lowering inflation and supporting job growth. Powell has stated that there is no risk-free path, elaborating that while reducing interest rates may seem appealing, it carries potential risks, such as reigniting inflation. At the same time, keeping a restrictive policy in place for too long could unnecessarily soften labor markets.
The Fed has started lowering interest rates to stabilize the faltering job market, but may need to keep them high if elevated inflation persists. Last week, policymakers decided lowering the rate in the face of high inflation was the lesser of two evils. Powell said the Fed is working under the assumption that President Donald Trump's tariffs will cause a one-time boost to prices rather than setting off a cycle of persistent price hikes, or in other words, high inflation.
