DOJ concludes its criminal investigation into Jerome Powell

The U.S. Department of Justice (DOJ) concluded its criminal investigation into Jerome Powell on Friday. The ruling relieves the head of the central bank of urgent legal pressure while highlighting broader ramifications for Washington’s institutional independence and political accountability. 

The Fed chair was essentially exonerated of any misconduct after officials concluded that the evidence in the Federal Reserve investigation did not satisfy the requirements for criminal prosecution. After reviewing testimony, records, and documents about the Federal Reserve building renovation project, they concluded there was no need for further criminal enforcement. 

U.S. Attorney for D.C. Jeanine Pirro stated that the Federal Reserve Inspector General has been ordered to conduct an independent investigation into building cost overruns that implicate taxpayer exposure. Pirro pointed out that the Inspector General has the power to assess the Federal Reserve’s accountability and to write a thorough report on the matter. She also confirmed that her office has concluded its criminal investigation while the Inspector General conducts its evaluation.

Pirro further added that the inquiry may be reopened if new information warrants it.

Powell probe closure clears path for Fed transition

The Justice Department’s closure of its investigation into Federal Reserve Chair Jerome Powell transferred any lingering oversight to administrative review procedures. It officially eliminated federal criminal exposure related to the charges.  The closure of the investigation also eliminated a political barrier related to the larger Federal Reserve leadership transition process.

The ruling also cleared a pathway for Kevin Warsh, who has been proposed as a possible replacement to head the central bank under President Donald Trump. Lawmakers postponed consideration of Fed appointments while the criminal investigation was ongoing, citing concerns about moving forward amid unresolved legal scrutiny.

Noah Buffam, Director of FICC Strategy at CIBC Capital Markets in Toronto, commented that Warsh’s policy position is seen as marginally more dovish than Jerome Powell’s. 

Buffam pointed out that Powell concentrated more on core inflation, eliminating food and energy, while Warsh stressed reduced and median inflation metrics.  According to Buffam, the markets saw this discrepancy as evidence in favor of a quicker rate cut.  

Brian Jacobsen, Chief Economist at Annex Wealth Management in Menomonee Falls, Wisconsin, also commented that with the DOJ investigation now closed, Warsh can effectively be viewed as the Chair-in-Waiting.

Markets rally as Fed uncertainty fades post-investigation

Financial markets surged across a variety of asset classes following the Justice Department’s closure of its investigation. On-chain data revealed that Investors instantly repriced expectations for monetary policy stability. The Nasdaq Composite added 355.86 points during the session, increasing 1.46 percent to 24,794.36. The Nasdaq U.S. 500 Large Cap index increased 0.66 percent to 3,710.61, while the Nasdaq-100 climbed 1.75 percent to 27,251.97. 

The Stoxx Europe 600 dropped 0.6%, while the Dow Jones Industrial Average barely moved. The Philadelphia Stock Exchange Semiconductor Index increased 4.2%, while the MSCI World Index increased 0.4%. Strong gains in technology-heavy names and risk assets supported the surge.

TradingView data showed the U.S. dollar declined during the session, trading at $98.543, down 0.2%. The Bloomberg Dollar Spot Index lost 0.2% as traders adjusted positions amid reduced political and policy uncertainty around Federal Reserve leadership.

The wide risk repricing was prolonged by currency markets and fixed-income assets, with most currencies appreciating vs the US dollar. The British pound increased 0.4 percent to $1.3518, the Japanese yen climbed to 159.35 per dollar, and the euro increased 0.3 percent to $1.1718. 

The trend of cryptocurrency markets was varied, with Ether falling 0.1 percent to $2,322.98 and Bitcoin rising 0.2 percent to $78,032.27. 

 U.S. Treasury markets also experienced a dramatic reaction as rates fell across the curve. The 10-year Treasury yield fell three basis points to 4.30 percent, and the 2-year yield fell six basis points to 3.78 percent.

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