In an unprecedented move, federal prosecutors in the United States opened a criminal investigation into Federal Reserve Chairman Jerome Powell, according to a video Powell released on Sunday (January 11).In the video, Powell said that the US Department of Justice served the Fed with subpoenas and threatened a criminal indictment over his testimony to a Senate committee. A subpoena is a written order to attend a court of law to give evidence, and the case in question pertains to some building renovations at the Fed’s headquarters in Washington, DC.Powell argued that the probe was launched due to the frustrations of US President Donald Trump, stemming from the Fed’s refusal to lower interest rates in line with his expectations. The probe, which prosecutors have not confirmed, could signal a fresh escalation in Trump’s slugfest with Powell. Incidentally, it was Trump who had nominated Powell for the job in 2017, during his first term.The US Fed, like many of America’s independent institutions, has traditionally enjoyed an arm’s length of distance in setting interest rates, independent of presidents and the executive branch. Under Trump 2.0, however, that independence has been frequently tested. The Fed Chair is the latest to draw Trump’s ire, and in the process, invite criminal investigation by the American justice department.Powell’s investigation will be supervised by the US Attorney’s Office for the District of Columbia, according to The New York Times, which broke the story about the probe.Powell’s pushback“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 said in his response. Trump has repeatedly threatened to remove Powell, who he has lambasted for not cutting interest rates fast enough. To be sure, in the second half of 2025, the Fed cut interest rates three times.“I have deep respect for the rule of law and for accountability in our democracy. No one, certainly not the Chair of the Federal Reserve, is above the law, but this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure,” Powell added.Story continues below this adIan Bremmer, president and founder of the Baltimore-based Eurasia Group said of the federal investigation, “Political loyalty to President Trump the decisive factor for the US attorney’s office, not rule of law. Let’s see if the business community has anything public to say condemning this. Since republicans in congress will not.”Commenting on Powell’s video message, David Folkenflik, NPR Correspondent and the author of the book Murdoch’s World said on X, “Extraordinary assertion of independence by Fed Reserve Chair Powell, saying US DoJ is investigating him as payback for setting interest rates higher than President Trump wants… Reminder: Powell was first appointed Fed chair by Trump.”Powell is one among the manyTrump administration officials have repeatedly accused the Fed of “mishandling” the multi-billion renovations at the Fed headquarters. Trump himself had repeatedly threatened legal action.Meanwhile, Trump said in an interview with NBC News on Sunday that he did not “know anything” about the Justice Department’s investigation. “I don’t know anything about it, but he (Powell) is certainly not very good at the Fed, and he’s not very good at building buildings,” he said.Story continues below this adAlso Read | How even a conservative Supreme Court pushed back on Trump in Lisa Cook caseTrump had previously targeted Lisa Cook, a governor at the US Fed, whom he tried to fire over alleged mortgage fraud. The case was blocked by an American federal court and will be heard by the Supreme Court later this month. Criminal charges brought by Trump’s justice department against ex-Federal Bureau of Investigation boss James Comey were also dismissed by a court.Just last year, the Supreme Court of the United States held that “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States”. This reasoning helped Cook stay on.As inflation is projected to inch upwards from early 2026, the odds for a January rate cut have remained low. Even traders had begun pricing in a higher chance of a March reduction. The CME Group’s FedWatch tool showed a 58.3 per cent probability of a rate cut for the month, up from around 53.9 per cent last week.In the larger scheme of things, the investigation sends a message that long-held expectations of the Fed’s independence may need to be tapered, with possible impact on how it acts on key future policies, in turn impacting the rest of the world.