US opens criminal probe into Fed chair Jay Powell

US prosecutors have launched a criminal investigation into Federal Reserve chair Jerome Hayden 'Jay' Powell , escalating tensions between the Trump administration and the central bank.

Powell said Sunday that the Fed received grand jury subpoenas connected to his congressional testimony last summer regarding a $2.5bn headquarters renovation. He argued the inquiry was a pretext intended to pressure the bank into cutting interest rates in line with President Trump’s demands.

“This is not about the renovation or last June’s testimony,” Powell said, insisting that the Fed was being targeted for determining interest rates independently rather than following the White House’s preferences.

Trump denied involvement, though he repeated criticisms of Powell, claiming the investigation was unrelated to rate policy. Investors reacted nervously, with the dollar and S&P 500 futures falling in early Asian trading.

Former Fed officials and economists criticised the probe as a threat to central bank independence, which is widely viewed as a pillar of US economic stability. Powell said he would not resign, pledging to continue serving through the end of his term in May.

The subpoenas reportedly request documents related to Powell’s testimony and planning for the renovation, which has run significantly over budget. Trump allies have accused Powell of misleading lawmakers, claims he has rejected.

The move has divided Republicans, with Senator Thom Tillis warning that the Justice Department’s credibility is now on the line. He vowed to oppose any replacement nominee until the matter is resolved. The White House is expected to announce Powell’s successor soon, with economist Kevin Hassett considered a leading contender.

Democrats accused Trump of attempting a takeover of the Fed. Meanwhile, a separate legal fight over the president’s authority to fire central bank officials is heading to the Supreme Court.

The Justice Department has not commented on the investigation.