A federal judge dealt a significant setback to a Justice Department probe into Federal Reserve Chair Jerome Powell on Friday by quashing two grand jury subpoenas issued to the central bank's Board of Governors.

U.S. District Judge James E. Boasberg, in a ruling dated March 11 but unsealed Friday, found that the subpoenas had an improper purpose. He wrote that 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." The judge added that prosecutors had "produced essentially zero evidence to suspect Chair Powell of a crime," describing their justifications as "so thin and unsubstantiated" that they were pretextual.

The subpoenas, issued in January by the office of U.S. Attorney Jeanine Pirro, sought records related to a $2.5 billion renovation project for the Federal Reserve's aging headquarters buildings, including the Marriner S. Eccles Building. Powell had testified about the project before the Senate Banking Committee last June, defending cost increases from an initial $1.9 billion estimate due to design changes and unforeseen issues. The probe focused on potential false statements to Congress or fraud, but Boasberg noted prior audits by the Fed's inspector general found no issues.

Powell publicly disclosed the investigation in an unprecedented video statement on January 11, calling it an affront to the Fed's independence. He argued it raised questions about whether monetary policy would be set by economic data or political pressure. The disclosures prompted bipartisan criticism on Capitol Hill and delayed Senate consideration of President Donald Trump's nominee to replace Powell, former Fed Governor Kevin Warsh, whose confirmation Tillis has blocked until the probe ends.

Trump, who returned to the White House in January 2025, has repeatedly criticized Powell for not cutting interest rates aggressively enough, calling him one of his worst appointments and threatening action against him. Boasberg cited Trump's public statements, including vows that dissenters would not chair the Fed, as part of the evidence of improper motive.

Pirro responded swiftly to the ruling at a news conference Friday, calling Boasberg an "activist judge" who had "neutered the grand jury’s ability to investigate crime" and announcing plans to appeal. She denied political motivations, insisting the focus was on potential false statements and fraud.

Republican Sen. Thom Tillis of North Carolina welcomed the decision, stating it confirmed the probe was "weak and frivolous." He reiterated that appealing would only delay Warsh's confirmation as the next Fed chair when Powell's term expires on May 15.

The ruling underscores ongoing tensions between the Trump administration and the Federal Reserve, with the central bank's independence a key issue as it navigates economic policy amid political pressures.