US Justice Department Drops Probe into Fed Chairman Jerome Powell

The US Justice Department is dropping its investigation into Federal Reserve Chairman Jerome Powell over alleged building cost overruns. US Attorney Jeanine Pirro announced that an internal investigation will be conducted by the central bank's inspector general instead. This decision comes amid a long-standing feud between President Donald Trump and Powell regarding the costs of the Fed's building renovations, which Trump has criticized as excessive.

Powell's term is nearing its end, and the US Senate is currently considering Trump's nominee for his replacement, Kevin Warsh. Key Republican Senator Thom Tillis has withheld support for Warsh unless the investigation into Powell is dropped. White House spokesman Kush Desai stated, "American taxpayers deserve answers about the Federal Reserve's fiscal mismanagement," emphasizing the inspector general's authority in the matter. Desai expressed confidence that the Senate would swiftly confirm Warsh to restore competence in Fed decision-making.

This situation highlights the ongoing power struggle between the Trump administration and the Federal Reserve. Powell's public pushback against the investigation underscores the tension surrounding the independence of the central bank. Powell previously warned that the integrity of monetary policy is at stake, stating, "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." As Powell's term nears its conclusion, the dynamics of the Senate confirmation process for Warsh will be critical in determining the future direction of the Federal Reserve.

What to watch: The Senate's upcoming decision on Kevin Warsh's confirmation as the next Federal Reserve Chairman.