U.S. federal prosecutors in Washington, D.C. have launched a criminal investigation into Federal Reserve Chair Jerome H. Powell, focusing on the costly renovation of the central bank’s headquarters and whether he misled Congress about the scale and features of the project, according to officials familiar with the matter.

The probe reviews Mr. Powell’s public remarks and examines internal spending records related to the renovation. Officials said the investigation was authorized in November by Jeanine Pirro, a longtime ally of former President Donald Trump who was appointed last year to lead the U.S. attorney’s office in the District of Columbia.

This development deepens the long-standing conflict between Mr. Trump and Mr. Powell. Mr. Trump has repeatedly criticized the Fed chair for refusing to sharply cut interest rates and has openly suggested removing him from office, despite having nominated him in 2017. The former president has also floated the idea of legal action tied to the $2.5 billion renovation project, accusing Mr. Powell of incompetence.

In a recent interview with The New York Times, Mr. Trump said he had already chosen who he wants to succeed Mr. Powell as Fed chair and is expected to announce his decision soon. Kevin A. Hassett, a senior economic adviser to Mr. Trump, is widely viewed as a leading candidate. While Mr. Powell’s term as chair ends in May, his position as a Fed governor extends through January 2028. He has not publicly stated whether he intends to remain at the central bank after this year.

On Sunday, the Federal Reserve released an unusual video message featuring Mr. Powell, in which he described the investigation as unprecedented and questioned its underlying motives. He emphasized that he has carried out his responsibilities without political influence.

According to Mr. Powell, the investigation is not genuinely about his congressional testimony last June or about the renovation itself. He said the Fed had consistently sought to keep Congress informed through testimony and public disclosures, calling the stated concerns a pretext. He warned that the situation reflects a broader challenge to the independence of the Federal Reserve.

Mr. Powell argued that the threat of criminal charges stems from the Fed’s decision to set interest rates based on economic analysis rather than political pressure. He cautioned that the case raises a fundamental question about whether monetary policy will continue to be guided by data and economic conditions or instead shaped by intimidation and partisan demands.

A spokesperson for Attorney General Pam Bondi declined to comment directly on the investigation but said she has instructed U.S. attorneys to prioritize cases involving potential misuse of taxpayer funds.

The investigation into Mr. Powell is part of a wider confrontation between Mr. Trump and the Federal Reserve. Another flashpoint involves Lisa D. Cook, a Fed governor whom Mr. Trump attempted to remove over allegations of mortgage fraud. Under the law, presidents may dismiss Fed officials only for cause, such as misconduct or failure to perform their duties. The Supreme Court is scheduled to hear arguments in Ms. Cook’s case on January 21.

Congress deliberately designed the Federal Reserve to operate independently from the White House, recognizing that presidents often have strong political incentives tied to economic performance. Lawmakers charged the central bank with maintaining stable inflation and supporting a healthy labor market, free from direct presidential control.

Mr. Powell disclosed on Sunday that the Justice Department has issued grand jury subpoenas to the Fed. Prosecutors have repeatedly contacted his staff seeking documents related to the renovation, according to an official familiar with the investigation who spoke anonymously due to the sensitivity of the matter.

While opening an investigation is relatively straightforward, securing an indictment from a federal grand jury and sustaining it in court is far more difficult. Recent efforts against several of Mr. Trump’s prominent adversaries illustrate that challenge. Indictments against former FBI Director James B. Comey and New York Attorney General Letitia James were dismissed by a federal judge in November, and an investigation involving Senator Adam B. Schiff has yet to produce sufficient evidence for a grand jury presentation.

The renovation project at the center of the inquiry began in 2022 and is scheduled for completion in 2027. Costs have exceeded initial estimates by roughly $700 million. The work involves expanding and modernizing the Marriner S. Eccles Building and a neighboring structure on Constitution Avenue, both originally built in the 1930s.

The Federal Reserve has stated that neither building has undergone a comprehensive renovation since its construction nearly a century ago, arguing that major upgrades were long overdue. Planned improvements include removing asbestos and lead, addressing soil contamination, and bringing the facilities into compliance with modern accessibility requirements for people with disabilities.

An early version of the renovation proposal in 2021 mentioned features such as private elevators and dining areas for senior officials, upgraded water fountains, new marble elements, and a rooftop terrace for staff. During a congressional hearing in June, Mr. Powell said many of those features were no longer part of the current plan.

He told lawmakers that there would be no VIP dining room, no new marble beyond replacing damaged original materials, and no special elevators beyond existing ones. Mr. Powell explained that the project had evolved over time and that some previously considered elements had been eliminated.

Following his testimony, the Fed published a detailed question-and-answer document on its website supporting Mr. Powell’s statements. The central bank also released additional materials, including photos, annotations, and a virtual tour, to clarify how the plans had changed since 2021.

To explain the rising costs, the Fed pointed to higher prices for materials, equipment, and labor, as well as unexpected issues such as larger-than-anticipated asbestos removal and soil contamination discovered during construction.