The US Department of Justice has dropped its criminal investigation into Federal Reserve chair Jerome Powell, clearing a major obstacle in the central bank's leadership transition.
In a statement on X, Jeanine Pirro, US attorney general for the District of Columbia, said she had asked the Fed’s inspector general, an internal watchdog, to scrutinise cost overruns in the multi-billion dollar renovation project at the Fed's headquarters.
Ms Pirro had previously given the project's cost overruns as the reason for her investigation into Mr Powell. “Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry,” she said.
Mr Powell has argued that the investigation was a pretext to pressure him and his colleagues to lower interest rates. He has repeatedly attracted the ire of President Donald Trump for not lowering borrowing costs. The Federal Reserve declined to comment.
The announcement is likely to pave the way for Kevin Warsh, who served on the Federal Reserve's board of governors during the global financial crisis, to succeed Mr Powell when his term as chair expires next month.
The investigation was a major sticking point in the Fed's leadership transition, with the inquiry considered to threaten the central bank's independence. Senator Thom Tillis, a Republican who sits on the committee that vets Fed candidates, has vowed to block any of President Donald Trump's nominees to the board until the Powell investigation is resolved.
Mr Tillis's office did not immediately respond to The National's request for comment. Mr Warsh appeared before the Senate Banking Committee earlier this week, where he said Fed independence is “critically important” but “has to be earned”.
During his hearing, Mr Warsh also said Mr Trump has “never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so”.
Mr Warsh has been an outspoken critic of the Federal Reserve since leaving the board in 2011 and argued it has put its own independence at risk by straying from its core mission. White House spokesman Kush Desai said in a statement that US taxpayers “deserve answers about the Federal Reserve’s fiscal mismanagement”.
“The White House remains as confident as before that the Senate will swiftly confirm Kevin Warsh as the next Federal Reserve Chairman to finally restore competence and confidence in Fed decision-making,” Mr Desai said.
Mr Powell's term as Fed chair expires May 15. He is still eligible to serve his remaining two years as a Fed governor, although he has not yet publicly said if he intends to do so.
The Fed is set to hold its next two-day meeting next week, where policymakers are expected to hold interest rates steady as they continue to assess the economic fallout from the Iran war.
