• The DOJ will drop the criminal probe into Fed Chair Jerome Powell.
• The Fed's Inspector General will take over the investigation, the Attorney General said.
• The move paves the way for Kevin Warsh to be confirmed as Powell's successor.

The Department of Justice will drop its probe into Federal Reserve Chair Jerome Powell, US Attorney Jeanine Pirro announced Friday.

She said the Inspector General for the Fed has been asked to "scrutinize the building costs overruns — in the billions of dollars — that have been borne by taxpayers," and will take over the investigation from the DOJ. This means the possibility of criminal charges against Powell has been dropped for now.

The department launched a probe in January into Powell over the Fed's alleged mishandling of construction funds at the central bank's Washington DC buildings.

"Note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so," Pirro said on X. She added that she expects "a comprehensive report in short order" from the Inspector General and is "confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas."

The Fed — and Powell specifically — has faced ongoing scrutiny from the Trump administration. When the probe was announced in January, Powell posted a video online, saying that, "No one — certainly not the chair of the Federal Reserve — is above the law. But this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure."

The Fed declined to comment to Business Insider on Friday.

The chair's term is set to end on May 15, though he indicated that he may remain on the Federal Open Market Committee as a governor.

Warsh is one step closer to confirmation

Trump nominated former Wall Street executive Kevin Warsh as Powell's successor in February, and a hearing before the Senate Committee on Banking, Housing, and Urban Affairs was held on April 21.

The largest obstacle to Warsh's confirmation has been Sen. Thom Tillis, a North Carolina Republican, who has repeatedly said he would block any potential Powell replacement until the Justice Department ended its probe. Tillis, along with other lawmakers across the aisle, has expressed concern that the probe was political overreach — and a threat to future Fed independence.

Following Warsh's confirmation hearing, Tillis renewed his push for an off-ramp that would allow him to drop his objection and for Warsh to proceed to likely confirmation. Tillis told reporters that one idea would be for one or more congressional committees to take up the investigation into the updates to the Fed's headquarters in Washington.

"I not only think it's a good off-ramp, but I also think it's good governance," Tillis told reporters after the confirmation hearing, per Politico.

Pirro's statement isn't what Tillis outlined, but Federal Reserve Inspector General Michael E. Horowitz is widely respected by members of both parties on Capitol Hill. Tillis' office didn't immediately respond to a request for comment from Business Insider.

In 2025, Powell asked Horowitz to look into the ballooning cost of renovations at the Fed's headquarters. Horowitz's website already lists such an investigation as part of its ongoing work.

"We are assessing the Board's oversight of its Marriner S. Eccles Building and 1951 Constitution Avenue Building Renovation Project, including the associated costs," the description reads. "Our scope will include a focus on the key factors contributing to the cost estimate increases, including assessing whether discretionary design features contributed materially to those increases."

Sen. Tim Scott, a Republican senator from South Carolina who chairs the Banking Committee, said in a statement that he would invite Horowitz to brief Congress on his findings within the next 90 days.

The committee and Senate have yet to vote on Warsh's nomination, though he is likely to be greenlit. Warsh would be the wealthiest Fed chair in history, with financial disclosures showing that he is worth over $100 million.

Powell will hold the chair seat for one more rate decision — or until the next chair is confirmed. The FOMC is set to meet this coming week and is expected to hold rates steady.

This is a developing story, check back for updates.

• The Federal Reserve will announce its March interest rate decision on Wednesday afternoon.
• It's likely the FOMC will hold rates steady, especially as the Iran war has sent oil markets into chaos.
• The Fed will also release its first economic projections of 2026.

It's been a tumultuous few weeks for the US economy, and the Federal Reserve is paying attention.

The central bank will announce its second interest-rate decision of 2026 on Wednesday afternoon, with CME FedWatch predicting a near-total chance of a rate hold based on market moves. The Fed cut rates three times in the second half of 2025, and has penciled in at least one rate cut for the new year. For consumers, these policy decisions affect inflation, the job market, and borrowing costs.

At the March meeting, Fed leaders will consider the dismal February job growth report, steady inflation rate up through last month, first-quarter business outlook, and the budding energy and oil crisis in Iran. This is also Jerome Powell's second-to-last meeting as chair. He's set to be replaced by ex-Wall Streeter and Trump appointee Kevin Warsh in May if Warsh is confirmed by the Senate.

Here's what you need to know ahead of the decision.

The Fed has a near-total chance of holding rates

It's likely that the Fed will take a conservative approach to monetary policy in March. Holding rates steady could help control inflation. The ongoing Iran war has raised the price of gas and oil — something that's likely to impact everything from plane tickets to grocery costs over the next several months unless the situation improves. The February consumer price index, released March 11, increased 2.4% year over year, the same rise as in January. However, this figure doesn't yet reflect the spike in energy prices, as the overwhelming majority of the data predate the start of the conflict.

The Strait of Hormuz — a major trade throughfare between the Persian Gulf and the Gulf of Oman — has been largely closed by Iran's leadership since early March. The move is cutting off about 20% of global oil production, causing market volatility. Oil prices recently surged past $100 a barrel, and while they've calmed slightly, the key commodity is still far more expensive than it was before the war.

Mark Hamrick, senior economic analyst at Bankrate, told Business Insider the oil shock "creates a real problem for consumers in the broader economy at a time when affordability challenges have already been first and foremost in terms of the major issue that voters and consumers have been railing against."

Oil isn't the only commodity choked off by the closure of the Strait — the hit to fertilizer prices could soon cause food costs to rise if the war continues.

The job market, meanwhile, is showing clear signs of weakness. The disappointing February jobs report showed that US lost 92,000 jobs that month. The unemployment rate also inched up to 4.4%. This is a contrast from January growth and the central bank's optimistic employment outlook at their last meeting.

"The January report saw a really stark reversal from the slow movement in 2025, and there was a lot of expectation that this momentum would continue and keep pace. And that was not the case for February," Nicole Bachaud, an economist at ZipRecruiter, said.

Cory Stahle, an economist at Indeed Hiring Lab, advised people to look at the broader job market trend after the US got one good January report and a bad one in February. Still, as Stahle pointed out, the US basically hasn't created jobs in the past six months.

The Fed will also release its quarterly economic projections on Wednesday, offering a window into its rate decisions for the remainder of the year. With a recent track record of policy disagreements among Fed leaders, it's possible there will be a wide range of predictions.

What the Fed's decision means for consumers

Fed decisions impact mortgage and credit card rates, auto loans, inflation, and job market churn over time. Lower rates may juice a sluggish job market, at the risk of pushing consumer prices higher. Powell and the Federal Open Market Committee will weigh which side of their dual mandate to prioritize. The bank's inflation goal is 2%.

If the Fed holds rates, Americans' finances will remain largely unchanged. Mortgage, auto, and credit rates tend to fluctuate alongside the federal funds, though it takes a pattern of decisions before interest rates change noticeably for consumers. Businesses and job seekers hoping for cheaper borrowing and a hotter labor market might have to wait until later this year.

Powell said at the last Federal Open Market Committee press conference in January that America's economy is coming into the year "on a firm footing," but "policy is not on a preset course, and we will make our decisions on a meeting-by-meeting basis."

Leadership changes are imminent

Trump has nominated Warsh, a former bank executive and central bank governor, to succeed Powell as Fed chair. Warsh has a reputation for hawkish monetary policy and for being tough on inflation, and it's unclear whether he will follow through on Trump's request for more rate cuts.

Matt Colyar, an economist at Moody's Analytics, said the inflation story will be interesting to follow.

"You got a Fed chair tapped because he got the job because of his stated intention of lowering interest rates, and now you're going to get an inflationary shock that's going to push up prices with no real clear end game in sight," Colyar said about the oil shock and spillover effects from the Iran war.

Warsh's nomination is shadowed by tensions between the central bank and the White House. Fed Governor Lisa Cook's case was heard by the Supreme Court earlier this year after Trump accused her of mortgage fraud, which her legal team denies. Powell also announced in January that the Department of Justice launched a probe — which is still ongoing — into the Fed's handling of construction at its Washington, DC, buildings.

The probe sparked major concerns about political pressure on interest rates and Fed independence. Last week, federal judge James Boasberg squashed two subpoenas from the DOJ as part of the probe.

"A mountain of evidence suggests that the Government served these subpoenas on the Board to pressure its Chair into voting for lower interest rates or resigning," Boasberg said.

Senators from across the aisle, including retiring North Carolina Republican Thom Tillis, who sits on the Senate Committee on Banking, Housing, and Urban Affairs, have signaled that they will oppose a confirmation vote for Warsh or any of Trump's Fed picks because of the DOJ probe. These confirmation hearings have not yet been scheduled, though Powell's term ends May 15.

The president hopes to see a rate cut sooner rather than later.

"Where is the Federal Reserve Chairman, Jerome 'Too Late' Powell, today?" Trump posted on March 12. "He should be dropping Interest Rates, IMMEDIATELY, not waiting for the next meeting!"