Federal Reserve Chairman Jerome Powell asserted that a Justice Department criminal probe is an attack on the central bank's independence, stemming from the Fed's decision not to lower interest rates earlier this year as requested by then-President Donald Trump. Powell issued a statement Sunday revealing that the Justice Department served the Fed with grand jury subpoenas, threatening a criminal indictment related to his testimony before the Senate last June concerning renovations at the Fed headquarters, which have experienced cost overruns.

Powell characterized the probe as politically motivated, dismissing the renovations and his testimony as pretexts. "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 stated. He emphasized the core issue as "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 investigation centers on Powell's testimony regarding cost overruns during the renovation of the Federal Reserve's headquarters. These renovations have been a subject of scrutiny, with some critics questioning the management and oversight of the project. The Justice Department has not yet commented on the specifics of the investigation.

Powell's remarks represent a rare public rebuke of a presidential administration by a sitting Federal Reserve chair. The Fed is designed to operate independently of political influence to ensure monetary policy decisions are based on economic data and analysis, rather than short-term political considerations. This independence is seen as crucial for maintaining stable prices and promoting full employment.

The current situation raises questions about the potential for political interference in monetary policy. Some economists and legal experts have expressed concern that the Justice Department's actions could undermine the Fed's credibility and its ability to effectively manage the economy. Others argue that all government officials, including the Fed chair, should be held accountable for their actions and that the investigation is a legitimate exercise of oversight.

Powell noted that he has served under both Republican and Democratic administrations, suggesting that the Fed's independence is a bipartisan principle. The investigation is ongoing, and the next steps will likely involve further testimony and document review by the grand jury. The outcome of the probe could have significant implications for the future relationship between the Federal Reserve and the executive branch.