As global central bankers issued a rare letter of support for Federal Reserve independence, blowback against the Department of Justice probe of Chair Jerome Powell mounted that it could threaten the White House search for Powell’s successor as well as markets.
The unprecedented criminal investigation against a sitting Fed chair rattled not only economists, industry heads and politicians but also members of the Trump administration and its allies.
While the initial reaction of markets appeared subdued, financial leaders, including J.P. Morgan CEO Jamie Dimon warned of potential global economic destabilization that could erupt if President Donald Trump’s campaign for lower interest rates led to a rupture in Fed independence.
One Trump insider described the fallout from the DOJ probe in three words to The Wall Street Journal on Jan. 13: “A huge cluster.”
As global central bankers issued a rare letter of support for Fed Chair Jerome Powell, blowback against the Department of Justice criminal probe mounted.
A defiant Powell pushes back against DOJ probe
The unprecedented threat of criminal charges against the head of the U.S. independent central bank came to light late Jan. 11.
More Federal Reserve:
Powell announced that the DOJ issued subpoenas to his office related to the cost of the $2.5 billion renovation of the Fed’s headquarters and whether Powell perjured himself describing the work and expense to Congress.
“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,” a defiant Powell said in a two-minute video. (Read the transcript here.)
Powell links DOJ probe to interest-rate cuts
Powell said the DOJ served the Fed with grand jury subpoenas on Jan. 9, threatening a criminal indictment related to his testimony before the Senate Banking Committee in June 2025 on the cost of the renovations.
‘’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,’’ Powell said.
“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,’’ the chair added.
Trump, Bessent, Dimon react to DOJ action
The president, who has been vicious in his attacks on Powell for failing to slash interest rates, said he was not aware of the investigation by U.S. Attorney Jeanine Pirro, a longtime Trump loyalist.
The action also was a surprise to Treasury Secretary Scott Bessent, according to several news organizations.
Axios reported that Bessent warned Trump that the investigation had created a mess and could be bad for financial markets.
Meanwhile, Bloomberg reports that JPMorgan’s Jamie Dimon called out the risk of Fed uncertainty amidst the conflict with the Administration.
“Everyone we know believes in Fed independence,” said Dimon in a media call following the bank’s earnings call. “And anything that chips away at that is probably not a great idea. And in my view, will have the reverse consequences. It’ll raise inflation expectations and probably increase rates over time.”
Pirro explains DOJ Fed subpoenas
On Monday night, Washington time, Pirro, in a X post late Jan. 12, said her office contacted the Fed on “multiple occasions to discuss cost overruns and the chairman’s congressional testimony, but were ignored, necessitating the use of legal process — which is not a threat.”
Related: Powell pushes back as DOJ probe raises fears for Fed independence
Pirro added: “The word ‘indictment’ has come out of Mr. Powell’s mouth, no one else’s. None of this would have happened if they had just responded to our outreach.”
Despite Trump’s comments and objections from lawmakers from both sides of the aisle, Bloomberg reported Jan. 13 that, according to a source, Pirro intends to continue the investigation.
Global central bankers blast Fed probe
The coordinated response of central bank heads said they “stand in full solidarity” with the Fed and Powell.
“The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve,” the central bankers said Jan. 13 in a statement.
“It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”
The coordinated response underscores growing alarm that monetary autonomy within the world’s most important central bank is being actively dismantled, Bloomberg reported.
Such collective action has usually been reserved for global emergencies like the 2008 crash and the pandemic and not the defense of an individual central banker.
“It’s extremely rare for central banks to speak with one voice. The message is loud and clear: This is not just about one person, but about protecting the Fed’s independence — the foundation of credible and effective monetary policy,” Simona Delle Chiaie, chief euro-area economist for Bloomberg Economics, said Jan. 13.
Related: Investors focus on Fed independence as chair decision looms