The controversy surrounding the renovation of the Federal Reserve’s Washington headquarters is quickly escalating into a full-blown crisis over the central bank’s independence. In a video statement released on January 11, Fed Chair Jerome Powell responded by asserting that the criminal investigation by prosecutors is merely a pretext, and that the real issue stems from the Fed’s commitment to setting interest rates based on economic analysis rather than political pressure.
01 Breaking News
The Office of the U.S. Attorney for the District of Columbia has launched a criminal investigation into Fed Chair Jerome Powell. The probe centers on the Federal Reserve’s handling of its Washington headquarters renovation project and whether Powell misled Congress about the scope of the project.
The renovation, with a total cost estimated at $2.5 billion, has faced controversy since its inception. The project includes essential upgrades such as asbestos removal and improvements to electrical and ventilation systems.
The investigation was triggered by Powell’s testimony before the Senate Banking Committee last June. The Department of Justice has issued a grand jury subpoena to the Fed, threatening criminal charges.
02 Powell’s Forceful Response
In his January 11 statement, Powell directly attributed the criminal investigation to his disagreements with the Trump administration over interest rate policy. He described the move as unprecedented and said it should be viewed in the context of ongoing pressure and repeated threats from the current administration.
He stated clearly: "These are just excuses. The threat of criminal charges is really because the Federal Reserve always sets interest rates based on our best judgment for the public interest, not by blindly following the president’s personal preferences."
Powell emphasized the core issue: "This is about whether the Federal Reserve can continue to set interest rates based on evidence and economic conditions—or, in other words, whether monetary policy will be subject to political pressure or coercion."
03 Immediate Market Reaction
News of the investigation sent financial markets into swift motion. The U.S. Dollar Index and U.S. equity futures fell across the board, while international gold and silver prices surged sharply, setting new records.
As of publication, spot gold was up 1.88%, and spot silver had jumped more than 4%. Market analysts noted that if this situation is seen as a serious impediment to Powell’s ability to serve as Fed Chair, U.S. stocks and the dollar could face further downward pressure.
This market response clearly reflects global investors’ concerns about threats to the Fed’s independence. The central bank’s ability to make independent decisions has long been a cornerstone of global financial stability.
04 A Prolonged Political Battle
This investigation is not an isolated incident; it marks the latest escalation in the long-running conflict between Trump and Powell. Since Trump began his second term as president last January, he has repeatedly urged the Fed to cut interest rates.
Trump aims to boost the economy and lower government borrowing costs. Frustrated by the Fed’s reluctance to ease rates, he has called for Powell’s resignation multiple times.
The president even publicly stated, "I’d love to fire him, but we’re close to the end of his term." Such open pressure is extremely rare in U.S. history, breaking decades of White House tradition respecting the Fed’s independence.
05 The Fed’s Response
Despite political pressure, divisions remain within the Fed regarding the direction of interest rate policy. The federal funds rate currently stands in the 3.5%–3.75% range.
Fed Governor Steven Meilan expects rates to be cut by about 150 basis points by 2026 to support labor market recovery. He projects core inflation to run at about 2.3%, close to the Fed’s target.
However, not all officials agree with this aggressive easing path. More are inclined to keep rates unchanged at least until more data on inflation and employment becomes available. Richmond Fed President Thomas Barkin stressed that future monetary policy must be "finely tuned."
06 The Link Between Monetary Policy and Crypto Markets
The Fed’s interest rate decisions are closely tied to the cryptocurrency market. Looser monetary policy often drives capital into riskier assets like crypto.
According to Gate’s platform data as of January 12, the crypto market is highly sensitive to macro policy shifts. The Bitcoin price is currently fluctuating near $189,000, with investor demand remaining strong. Meanwhile, Gate’s platform token GT price stands at $10.33, up 0.70% over the past 24 hours.
Citibank’s previous forecasts suggest Bitcoin could reach $143,000 by 2026. Institutional interest in digital assets continues to grow, and U.S. regulatory restrictions on cryptocurrencies are expected to ease further.
07 Succession Controversy
Powell’s term will end in May this year. Trump has indicated he expects to announce Powell’s successor in January 2026.
Market observers widely anticipate that Trump may nominate National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, or BlackRock Global Fixed Income CIO Rick Rieder.
Senate Banking Committee member and Republican Senator Thom Tillis stated he will "oppose confirmation of any Federal Reserve nominee—including the upcoming vacancy for Fed Chair—until this legal issue is fully resolved." This stance could complicate the process for appointing the next Fed Chair.
Outlook
When news broke of Powell’s criminal investigation, the dollar fell and gold and silver prices hit new records. This underscores the vital importance of Fed independence to global financial markets.
Senate Banking Committee member Thom Tillis has announced opposition to confirming any Fed nominee unless the investigation is fully resolved. This suggests the political battle surrounding the Fed is likely to drag on for months.
Regardless of the outcome, the tug-of-war between U.S. monetary policy and political power has entered an unprecedentedly tense phase. Investors should closely monitor developments to adjust their strategies in a timely manner.
