Central Banks Unite to Support Powell Amid Trump’s $2.5 Billion Investigation

In a show of solidarity, leaders from 11 major global central banks expressed their support for U.S. Federal Reserve Chair Jerome Powell amid a politically charged investigation led by the Trump administration regarding a $2.5 billion renovation of the Federal Reserve's headquarters. This situation has raised significant concerns about the independence of central banks and the potential impact on financial markets.

Key Takeaways

11 major central banks have shown support for Jerome Powell, emphasizing the necessity of central bank independence for market stability.
The investigation relates to cost overruns in a $2.5 billion renovation of the Federal Reserve's headquarters and has led to concerns over political pressure on monetary policy.
Powell has indicated that the investigation is retaliation for maintaining higher interest rates, asserting that the Fed does not bow to presidential pressure.
President Trump has denied any connection to the investigation, while market reactions suggest concern over the Fed's independence and monetary policy direction.
Trump's term expiration for Powell is set for May 15, 2026, and he has expressed intentions not to renominate him.

Central Banks Show Strong Support for Powell

This past week, leaders from various global central banks rallied in support of Jerome Powell, the chair of the U.S. Federal Reserve, warning that political pressures on the Fed might destabilize financial markets around the world.

This support comes in response to the Trump administration’s intensification of a criminal investigation related to a $2.5 billion renovation project at the Fed’s Washington headquarters. This renewed fears regarding the independence of central banks.

In a joint statement, representatives from 11 central banks stated their unwavering support for Powell, emphasizing that central bank independence is vital for price stability, financial resilience, and maintaining public confidence.

Federal Reserve Independence at Risk

The statement featured endorsements from high-ranking officials at major institutions such as the European Central Bank, Bank of England, and Bank of Canada, among others. They acknowledged Powell’s respected career and clear commitment to his role.

This show of backing followed Powell's unusually candid comments over the weekend. On January 12, he disclosed that the Justice Department had issued grand jury subpoenas to the Fed and was considering a potential criminal indictment concerning his testimony to the Senate Banking Committee in June 2025.

The testimony scrutinized the substantial cost overruns linked to the headquarters renovation, which has now exceeded initial projections by around $700 million.

In a televised address, Powell described the ongoing investigation as a direct consequence of the Fed's decision to maintain higher interest rates, contrary to Trump's public demands. He remarked that the threat of criminal charges originated from the Fed's commitment to prioritize public service over following presidential preferences. Powell also cautioned that the direction of monetary policy could fall victim to intimidation rather than being informed by economic evidence.

President Trump has refuted claims tying the investigation to interest rate policies, asserting that he had no knowledge of subpoenas and criticizing Powell's performance in office and overseeing construction. However, he claimed he would never consider using the Justice Department to sway the Fed on interest rates.

The White House has maintained that the Justice Department is acting autonomously in this matter.

Market Reactions and Political Impact

The criminal investigation has added fuel to a political battle that has been intensifying for several months. In July 2025, Representative Anna Paulina Luna formally reported Powell to the Justice Department over alleged inaccuracies in his statements concerning the renovation project.

Senator Thom Tillis, a Republican on the Banking Committee, indicated that he would impede the confirmation of future Fed nominees until the investigation issue is addressed, raising questions about the independence of the Justice Department itself.

Democratic Senator Elizabeth Warren has accused Trump of exploiting his prosecutorial powers to pressure the Fed, labeling the situation an attack on sound economic governance.

Market reactions were immediate but measured, with a weaker dollar and declining U.S. stock futures, while Treasury futures saw a rally as investors considered the potential ramifications of ongoing pressure on the Federal Reserve.

Powell’s current chair term will conclude on May 15, 2026, but his tenure on the Fed's Board of Governors will continue until January 2028. Trump has openly stated he would not renominate Powell and mentioned a preferred replacement, with National Economic Council Director Kevin Hassett often viewed as the leading candidate.

This ongoing situation reflects a broader dynamic of tension between the Trump administration and various independent bodies. Reports by Politico suggest that the president's public demands for investigations into opponents have complicated previous prosecutorial efforts and could hinder any potential future cases against Powell, especially given Trump's long history of criticizing the Fed's interest rate strategies.