Global central bank leaders back Fed Chair Powell amid federal investigation

• International central bank leaders including those from the European Central Bank, Bank of England, and central banks of Australia, Canada, Sweden, Denmark, Norway, Switzerland, South Korea, Brazil and South Africa signed the solidarity statement emphasizing that central bank independence is 'a cornerstone of price, financial and economic stability'
• The Fed renovation project's estimated cost rose from $1.9 billion in 2019 to nearly $2.5 billion in 2025 due to increased construction material costs and asbestos/lead remediation, though Trump has claimed costs exceed $4 billion
• U.S. Attorney for D.C. Jeanine Pirro stated the Fed 'repeatedly failed to respond' to outreach from her office regarding alleged cost overruns, saying the legal process 'is not a threat' despite Powell's concerns about political intimidation

Summary

Federal Reserve Chair Jerome Powell is facing a criminal investigation by the Trump administration's Department of Justice, prompting unprecedented international support from global central bank leaders. The DOJ served grand jury subpoenas to the Fed on Friday related to perjury allegations concerning Powell's testimony before the Senate Banking Committee about the Fed's renovation project.

Key Developments:

A coalition of prominent central bankers—including European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey, and leaders from Australia, Canada, Sweden, Denmark, Norway, Switzerland, South Korea, Brazil, and South Africa—issued a joint statement backing Powell. They emphasized that "the independence of central banks is a cornerstone of price, financial and economic stability" and praised Powell's "integrity" and "unwavering commitment to the public interest."

The Controversy:

The investigation centers on the Fed's headquarters renovation project, initially estimated at $1.9 billion in 2019 but rising to nearly $2.5 billion by 2025 due to increased material costs and remediation work. President Trump has cited figures ranging from $3.1 billion to over $4 billion, accusing Powell of mismanagement.

Powell publicly stated the investigation is a "pretext" for political pressure to lower interest rates, asserting the probe 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."

Market Implications:

The unprecedented federal investigation into a sitting Fed chair raises concerns about central bank independence, a critical factor for financial stability and investor confidence in monetary policy decisions.