Global central bank leaders have expressed full support for U.S. Federal Reserve Chair Jerome Powell after a criminal investigation was opened against him in connection with a $2.5 billion renovation of the Fed’s headquarters in Washington. The probe has intensified scrutiny of the Federal Reserve as political tensions over interest rate policy escalate.
Powell confirmed on Sunday that federal prosecutors are examining the matter, which revolves around his testimony before Congress regarding the costly overhaul. He suggested the investigation is linked to political pressure from former President Donald Trump, who repeatedly urged the Fed to cut rates.
“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.
He warned that the outcome of the investigation could shape the future role of the central bank.
“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,” Powell added.
Central banks stress independence
On Tuesday, governors from 11 major central banks issued a rare joint statement supporting Powell and the Federal Reserve system. The signatories included European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, Bank of Canada Governor Tiff Macklem, and central bank leaders from Sweden, Denmark, Switzerland, Norway, Australia, South Korea, Brazil, South Africa, and New Zealand. Officials from the Bank for International Settlements also endorsed the statement.
“We stand in full solidarity with the Federal Reserve System and its Chair Jerome H. Powell,” the statement said. “The independence of central banks is a cornerstone of price, financial and economic stability in the interest of the citizens that we serve. It is therefore critical to preserve that independence, with full respect for the rule of law and democratic accountability.”
The signatories praised Powell’s record in office, describing him as a leader who has served “with integrity, focused on his mandate and an unwavering commitment to the public interest,” and as “a respected colleague who is held in the highest regard by all who have worked with him.”
Markets and crypto react
The legal investigation and political pressure have drawn attention from financial and digital asset markets. Farzam Ehsani, CEO of crypto exchange VALR, highlighted the potential impact on investor confidence.
“Central bank independence is traditionally considered a pillar of macroeconomic stability,” Ehsani said in the note. “Any attempt at political influence affects investor confidence. For crypto, weaker confidence in dollar policy can drive interest in decentralized assets, but sudden political shocks also increase volatility and short-term outflows from risk assets.”
Ray Youssef, CEO of crypto app NoOnes, noted that the dollar has weakened while gold and silver have gained, reflecting a rotation into perceived safe havens.
“A rate cut could increase liquidity and support crypto prices,” Youssef said. “But for now, the market remains fragile, with Bitcoin seeing selling pressure during US trading hours despite longer-term interest.”
Trump allies and Fed influence
The Trump administration has identified potential successors to Powell, with several allies publicly supporting aggressive rate cuts. Kevin Hassett, a senior economic adviser to Trump, is considered the leading candidate. The administration has strengthened its influence at the central bank through appointments such as Stephen Miran, a close Trump ally, who pushed for a 0.5% rate cut at his first board meeting in December.
The coordinated response from global central banks underscores the seriousness of the threat to Fed independence. Central bankers rarely intervene publicly in domestic political disputes, highlighting concerns that legal or political pressure could undermine confidence in monetary policy and financial stability.
As the investigation proceeds, Powell remains in office, and the Federal Reserve continues to set policy. The question now is whether the institution can operate free from political influence, a matter that carries implications not only for the United States but for central banks worldwide.
Kristian Koch
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