The Justice Department announced Friday it will drop its criminal investigation into Federal Reserve Chairman Jerome Powell, ending an unprecedented probe into the nation's top central banker.
The decision marks a sharp reversal for DOJ prosecutors who launched the investigation into Powell's conduct while leading the Fed. The probe represented the first time in the central bank's 111-year history that federal prosecutors examined a sitting Fed chair for potential criminal violations.
Powell's investigation created complications for President Trump's efforts to reshape the Federal Reserve. The criminal probe had cast uncertainty over the confirmation process for Trump's expected nominee to replace Powell when his term expires in May 2026.
The Fed chair wields enormous influence over American monetary policy, setting interest rates that affect everything from mortgage payments to credit card bills. Powell has overseen the Fed's response to inflation that peaked at 9.1% in June 2022 before falling to current levels around 3.1%.
Justice Department officials provided no details about the scope of the investigation or what triggered prosecutors to open the case. Federal law enforcement agencies rarely comment on closed investigations, particularly those involving high-ranking government officials.
Powell, who Trump first nominated to the Fed board in 2012 and later elevated to chairman, has maintained his innocence throughout the probe. The Fed chairman continued his regular duties during the investigation, including testifying before Congress and leading Federal Open Market Committee meetings.
Trump criticized Powell repeatedly during his first presidency, calling him a "bonehead" and suggesting he might fire him over interest rate decisions. Federal Reserve chairs serve four-year terms and can only be removed for cause, giving them independence from political pressure.
The dropped investigation removes a major obstacle for Trump's Fed plans. The president can now proceed with selecting Powell's replacement without the complication of ongoing criminal proceedings against the current chair.
Financial markets showed little reaction to the news, with major stock indices closing mixed Friday. Fed watchers expect Trump to name a replacement who favors lower interest rates and less banking regulation.
Trump's Fed pick will require Senate confirmation and face questions about monetary policy during a period of persistent inflation concerns. The president has signaled he wants more direct influence over Fed decisions, breaking with decades of central bank independence.
This is a developing story and will be updated.
