The US Department of Justice is dropping its criminal investigation into Federal Reserve Chair Jerome Powell over alleged cost overruns on the central bank’s Washington headquarters renovation, US Attorney Jeanine Pirro announced on Thursday.
Pirro said the matter would instead be handled by the Federal Reserve’s own inspector general, though she left open the possibility of restarting a criminal case “should the facts warrant doing so.” The Fed declined to comment.
The probe had centred on a renovation of the Fed’s Eccles and 1951 Constitution Avenue buildings. President Donald Trump had accused Powell of improper cost overruns, arguing the overhaul would cost $3.1 billion against the Fed’s $2.5 billion forecast. The Fed has said the renovations will reduce its costs over time.
“American taxpayers deserve answers about the Federal Reserve’s fiscal mismanagement, and the Office of the Inspector General’s more powerful authorities best position it to get to the bottom of the matter,” White House spokesman Kush Desai said in a statement.
The decision arrives amid a US Senate confirmation push for Trump’s nominee to replace Powell, Kevin Warsh. Republican senator Thom Tillis had withheld support for Warsh unless the Trump administration dropped the criminal investigation. Powell’s term expires on May 15, though he plans to remain in post until Warsh is confirmed.
The probe had escalated a long-running feud between Trump and Powell over monetary policy. Trump, who has called for lower interest rates, has previously branded Powell a “knucklehead” and a “lousy job” and floated the idea of firing him — a step some legal scholars said would be unlawful.
In January, Powell took the unusual step of releasing a video disclosing that the DoJ had served the Fed with subpoenas and threatened a criminal indictment over testimony he gave to a Senate committee about the renovations. He called the investigation “unprecedented” and said it had been opened due to Trump’s anger over the Fed’s refusal to cut rates.
“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 at the time.
The dropped probe removes one of the most acute threats to Federal Reserve independence and is likely to influence global rate expectations — a factor directly relevant to Sri Lanka’s external financing costs, IMF program assumptions, and rupee trajectory.
