Justice Department backs off Jerome Powell - for now

The Justice Department has closed its criminal investigation into Federal Reserve Chair Jerome Powell, but the reprieve comes with a warning. U.S. Attorney Jeanine Pirro said Friday that while her office is stepping aside, she "would not hesitate" to reopen the case if new facts emerge. The investigation has been handed off to the Fed's own inspector general, Michael Horowitz, who will examine the billions in cost overruns from the central bank's headquarters renovation.

The probe, opened in January, centered on Powell's testimony before the Senate Banking Committee regarding the $2.5 billion renovation project. Powell has consistently maintained that the investigation was politically motivated — a tool of pressure from an administration that wants lower interest rates. "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether monetary policy will be directed by political pressure or intimidation," Powell said in a public statement.

The practical impact is immediate. North Carolina Republican Senator Thom Tillis had been blocking a confirmation vote on Kevin Warsh, Trump's pick to succeed Powell as Fed chair, until the investigation was resolved. With that hurdle cleared, the Senate Banking Committee could vote on Warsh's nomination as early as next week.

Powell's term as chair expires in May, and the transition timeline is now accelerating. Prediction markets on Kalshi shifted dramatically after the announcement, with Warsh's confirmation odds jumping to 84%.

What This Means For You: The Federal Reserve's independence directly affects your mortgage rates, credit card interest, and savings yields. If the next Fed chair is perceived as more politically aligned, markets may price in faster rate cuts — which could lower borrowing costs but also risk higher inflation. Watch the Warsh confirmation hearings closely.