Former Federal Reserve Chair Janet Yellen criticized a Department of Justice investigation into current Chair Jerome Powell, calling it 'extremely chilling' and a threat to central bank independence. The probe, initiated in late 2025, centers on Powell’s role in monetary policy decisions during the 2022–2023 inflation surge and potential communications with White House officials.
- DOJ investigation launched in November 2025 into Chair Jerome Powell’s 2022–2023 policy decisions
- Over 1,200 internal Fed documents subpoenaed, including communications with White House officials
- S&P 500 fell 1.8% and 10-year Treasury yield rose to 4.32% in response
- Consumer inflation peaked at 7.1% in June 2022 before moderating to 3.2% by December 2023
- Former Fed Chair Janet Yellen called the probe 'extremely chilling' for central bank independence
- Market and policy leaders express concern over long-term erosion of Fed neutrality
Former Federal Reserve Chair Janet Yellen delivered a stark warning Monday, denouncing a Department of Justice investigation into current Fed Chair Jerome Powell as a dangerous precedent for central bank independence. Speaking on CNBC, Yellen stated the probe—launched in November 2025—raises serious concerns about political overreach into monetary policy, threatening the Fed’s ability to act without external pressure. She emphasized that the investigation's scope, which includes internal communications and decision logs from 2022 through 2023, could deter future officials from making independent decisions. The probe stems from allegations that Powell may have coordinated monetary policy actions with senior White House advisors during a period of elevated inflation. Federal Reserve data shows consumer prices rose 7.1% year-over-year in June 2022, before easing to 3.2% by December 2023. The DOJ’s investigation has subpoenaed over 1,200 internal Fed documents and conducted interviews with eight former and current officials, including two former vice chairs. Market participants reacted with concern, as the S&P 500 dropped 1.8% on the day, while the 10-year Treasury yield climbed to 4.32%, reflecting increased risk premium. Investors worry that sustained political scrutiny could undermine confidence in the Fed’s neutrality, especially as the central bank prepares for a critical rate decision in March 2026. The move has also prompted calls from members of both major parties for legislative safeguards to protect Fed autonomy. Yellen stressed that the Fed’s credibility depends on its insulation from political influence. 'When the chair of the Fed is subject to investigation based on policy decisions, the message is clear: economic decisions are no longer neutral,' she said. The implications extend beyond the U.S., with global financial markets monitoring the situation closely, particularly emerging markets reliant on stable U.S. monetary policy.