DOJ Probe Into Fed Renovation Escalates Trump–Powell Clash, Spooking Markets

A U.S. Justice Department investigation into a Federal Reserve building renovation project has intensified a long-running dispute between President Donald Trump and Fed Chair Jerome Powell, raising fresh concerns over the independence of the world’s most powerful central bank. In a strongly worded statement on Sunday, Powell disclosed the probe and warned it could lead to criminal indictment, calling it a “pretext” aimed at gaining political influence over the Fed to push faster interest rate cuts.

Trump told NBC he had no knowledge of the Justice Department’s actions, but renewed his criticism of Powell, whose leadership has faced increasing pressure as the Fed has moved more cautiously on rate reductions than the president prefers. Investors and economists warned the escalation risks undermining confidence in U.S. institutions, a key factor behind America’s financial dominance. Market reaction reflected the unease, with the dollar sliding toward its sharpest fall in three weeks, gold rising to a record high, U.S. stock futures dipping, and long-term Treasury yields climbing.

Analysts said the episode could carry broader consequences beyond immediate market moves, potentially lifting inflation expectations and increasing borrowing costs if political threats are seen as weakening central bank credibility. Powell’s pushback also comes as his term as chair approaches its end in May, with Trump signaling he will appoint a successor favoring aggressive rate cuts. While some economists believe the Fed will remain guided by economic data, others cautioned that the era of a purely technocratic, politically insulated Federal Reserve may be coming under growing strain.

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