US prosecutors have opened a criminal investigation into Federal Reserve chair Jay Powell, sharply escalating tensions between the central bank and the Trump administration and rattling financial markets.

According to the Financial Times, the US Department of Justice has issued grand jury subpoenas and threatened criminal charges linked to Powell’s testimony before Congress last year regarding a $2.5 billion renovation of the Federal Reserve’s headquarters.

Powell confirmed the investigation in a video statement, strongly rejecting what he described as an “unprecedented action” and warning that it represents an attempt to undermine the Federal Reserve’s independence. He said the probe was not genuinely about the renovation project but retaliation for the Fed’s refusal to cut interest rates more aggressively.

“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said.

The investigation comes after months of criticism from US President Donald Trump, who has repeatedly attacked Powell for resisting deeper rate cuts. Trump denied any involvement in the Justice Department’s actions, saying he was unaware of the probe and insisting it was unrelated to monetary policy.

Markets responded swiftly to the news. Gold rose to a record high as investors sought safe-haven assets, while the US dollar weakened. Futures tracking the S&P 500 fell, reflecting heightened concern over political pressure on the world’s most influential central bank.

The probe has intensified fears that the Fed’s independence — widely seen as a cornerstone of US economic stability — is under direct threat. Senior economists and former central bank officials described the move as deeply concerning, warning that sustained interference could lead markets to price in higher inflation risk and greater volatility.

Powell, whose term as chair is due to end in May, said he has no intention of resigning. “Public service sometimes requires standing firm in the face of threats,” he said, adding that he would continue to perform his duties with integrity.