A breakthrough in the USA. The prosecutor's office discontinues the investigation against the Fed chairman, the markets reacted

The head of the federal prosecutor's office in Washington, Jeanine Pirro, announced on Friday that she had discontinued the investigation into Federal Reserve Chairman Jerome Powell over cost overruns for the renovation of Fed buildings. The decision paves the way for Senate confirmation of Powell's successor.

“This morning, the Federal Reserve's Inspector General was asked to investigate construction cost overruns – in the billions of dollars – incurred by taxpayers. (…) Accordingly, I have ordered my office to close our investigation while the Inspector General conducts it. Please note, however, that I will not hesitate to reopen a criminal investigation if the facts require it,” Pirro wrote in a statement published on the X platform.

The decision marks the end of a controversial investigation into the governor of the US central bank, widely interpreted as political retaliation by the White House for failing to meet President Donald Trump's demands for faster interest rate cuts.

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Earlier, a federal court in Washington found Pirro's investigation groundless and politically motivated, canceling the prosecutor's subpoenas for Fed employees to testify in the case. The investigation has so far led to Republican Senator Thom Tillis blocking the confirmation procedures for Powell's potential successor, Kevin Warsh. Tillis announced that although he supports Warsh, he will block his confirmation by the Senate, considering the prosecution of Powell an attempt to attack the independence of the central bank.

Financial markets reacted positively to the news, causing interest rates on all US treasury bonds to decline.

The prosecutor's resignation occurred despite Trump's previous statements, which signaled that investigators must investigate the cost of renovating the Fed buildings because Powell is “incompetent, corrupt, or both.”

A senior White House official said the Fed's inspector general, the internal watchdog, is “in the best position to get to the bottom of the issue” of overhaul costs. He also expressed confidence that the Senate would quickly approve Warsh's candidacy.

Warsh participated in a hearing before the Senate Banking Committee on Tuesday, but the committee has not yet supported his candidacy due to Tillis' blockade. Warsh declared in the Senate that he “will not be a puppet” of President Trump, although at the same time he could not name what he disagreed with the president and refused to answer the question whether Trump lost the 2020 election.

The Fed's Inspector General already in 2021 conducted an audit of the building renovations that had been ongoing since 2017, and in light of Trump's allegations, Powell had already requested another inspection.

From Washington Oskar Górzyński (PAP)

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