The United States Justice Department has dropped its criminal investigation into Federal Reserve Chair Jerome Powell, removing a significant political and legal obstacle to the Senate confirmation of his nominated successor, Kevin Warsh. Jeanine Pirro, the U.S. Attorney for the District of Columbia — a Trump appointee — announced the decision on Friday via X, stating that the Fed's inspector general would take over scrutiny of the cost overruns at the central bank's Washington headquarters that had been the basis of the probe.

The investigation, launched in January, centred on allegations of mismanagement related to expensive renovations at the Fed's two historic Washington buildings. The overruns were attributed by the Fed to inflation, the high cost of asbestos removal, and the challenging conditions of the site — both buildings are constructed on marshy ground. A federal judge, James Boasberg, had already dealt a serious blow to prosecutors, finding "essentially zero evidence" of criminal conduct and quashing subpoenas issued to the Fed after describing the government's legal justification as "thin and unsubstantiated." A prosecutor had conceded at a closed-door hearing in March that no evidence of a crime had been found. In a further misstep, prosecutors made an unannounced visit to a Fed construction site but were turned away, drawing sharp criticism from defence attorneys.

The probe had been widely viewed — including by some Republicans — as part of a broader pattern of pressure by President Donald Trump on the Fed, an institution whose independence from political interference is a cornerstone of American monetary policy. Trump has long publicly clashed with Powell over interest rates, nicknaming him "Mr. Too Late" for his reluctance to cut rates quickly. A similar investigation was also opened against Fed Governor Lisa Cook, reinforcing analysts' concerns about executive interference in central bank affairs. Senator Elizabeth Warren, a Democrat, called Friday's announcement "an attempt to clear the way for Republican senators to confirm Trump's puppet as Fed chair," referring to Warsh.

The confirmation of Warsh, who served as a Fed governor from 2006 to 2011 and is regarded as a credible figure in financial circles, had been effectively blocked by Republican Senator Thom Tillis of North Carolina, who said he would not support Warsh while Powell remained under investigation. With the probe now closed, a Senate confirmation vote is expected to move quickly. Powell's term as chair expires on 15 May, and he is set to preside over what may be his final monetary policy meeting on 28–29 April. Markets broadly expect no change to interest rates, currently in the 3.50–3.75% range, with the earliest possible cut not anticipated until late 2025 at the earliest, according to the CME FedWatch tool.

Warsh, for his part, sought to distance himself from suggestions he would act as a rubber stamp for the White House. Testifying before the Senate Banking Committee on Tuesday, he stated that Trump had never asked him to commit to any specific rate decision and that he would not have agreed to do so if asked. "I will be an independent actor if confirmed," he said — remarks made just hours after Trump told CNBC he would be disappointed if Warsh did not cut rates immediately upon taking office. Currency markets reacted calmly to Friday's news, with the euro holding near $1.17, while short-term U.S. Treasury yields edged slightly lower, reflecting a modest reassessment of near-term rate expectations.