On April 24, the U.S. Justice Department announced it would end its criminal investigation into Federal Reserve Chair Jerome Powell, removing a major obstacle to the Senate confirming Kevin Warsh as the next Fed chairman. U.S. Attorney Jeanine Pirro stated the probe into Powell’s conduct and renovation costs at the Fed’s headquarters would be transferred to the Fed’s internal watchdog, according to The Straits Times.

Trump’s Pressure and Fed Independence

The investigation had drawn criticism for undermining the Fed’s independence, especially as President Donald Trump repeatedly pushed for lower interest rates and publicly criticized Powell. Ms. Pirro noted she would not hesitate to restart a criminal investigation should new facts emerge, as the probe had delayed the confirmation of Mr; Warsh, who was nominated by Trump to succeed Powell, whose term expires on May 15.

Powell, in a March 18 statement, called the DOJ probe a “pretext to undermine Fed independence,” according to DBS Group Research’s analysis. To prevent his resignation from being seen as a quiet departure or an admission of guilt, Powell invoked a holdover provision of the Federal Reserve Act, pledging to serve until a successor is confirmed and to continue as a Fed Governor until January 2028.

Warsh’s Stance on Independence

At a Senate Banking Committee hearing on April 21, Mr — Warsh emphasized his commitment to the Fed’s independence, stating, “Presidents tend to prefer rate cuts. If there is a difference. President Donald Trump expresses that very openly, without proxies or equivocation,” according to 경향신문; he added, “But the independence of the Fed rests with the Fed,” signaling his resistance to direct political pressure.

Trump has threatened to fire Powell or appoint an acting Fed chair if the Senate does not confirm Warsh by May 15; the administration’s strategy, however, has been described as legally unclear and potentially subject to challenge by the Board of Governors, which supports Powell’s continued leadership. DBS Group Research’s Philip Wee noted the potential for a “Two Popes” scenario, a leadership clash between Powell and Warsh — which could create uncertainty in the financial markets.

Market Implications and Political Tensions

With the DOJ probe now closed, the Senate is expected to move forward with confirming Warsh as the next Fed chair. The transition, however, remains politically fraught. Trump has not publicly backed Warsh despite nominating him, and a messy or protracted leadership change could affect the U.S. dollar’s appeal as a safe-haven asset, according to DBS.

As tensions with Iran rise, a period of dual leadership at the Fed could raise market volatility, especially if the Fed’s independence is further questioned. Meanwhile, the Fed’s internal watchdog will now take over the renovation cost investigation, which was previously handled by the Justice Department under Trump’s pressure.