DOJ Drops Probe into Fed Chair Powell, Shifting Review to Inspector General Amid Renovation Cost Dispute

The US Justice Department has concluded its investigation into Federal Reserve Chair Jerome Powell regarding building renovation costs, transferring the review to the Fed's internal inspector general. This development comes amid a public dispute over expenditures and the central bank's operational independence.

The Justice Department will no longer pursue its probe into Federal Reserve Chair Jerome Powell concerning the central bank's building renovation expenditures. Instead, the Federal Reserve's own inspector general will now conduct an internal review of the matter. This decision follows a period of heightened scrutiny and political tension surrounding the costs of the Fed's Washington, D.C. headquarters renovation.

The renovation project became a point of contention when President Trump asserted that the Federal Reserve's building updates would cost $3.1 billion. This figure exceeded the Fed's own estimate of $2.5 billion for the overhaul and modernization, which marked the first significant work on the buildings since their construction in the 1930s. Powell had previously voiced concerns that the investigation threatened the Federal Reserve's fundamental ability to set interest rates based on economic evidence, rather than succumbing to political pressure. Interest rates, a key tool of monetary policy, influence borrowing costs and spending activity to manage economic stability.

Shifting the review to the Federal Reserve's inspector general moves the inquiry into an internal oversight mechanism. This change maintains scrutiny over renovation costs while removing the direct involvement of the Justice Department in a probe targeting the central bank's leader. The dispute over renovation costs and the associated investigation unfolded during a sensitive period for the Federal Reserve, with Powell's term nearing its end and the US Senate considering a nominee for his replacement. Observers will now watch for the findings of the internal review and its potential implications for the central bank's operations and leadership transition.