India, Jan. 12 -- The long-running standoff between Federal Reserve Chairman Jerome Powell and President Donald Trump has entered dangerous new territory. Federal prosecutors have opened a criminal investigation into Powell, a move the Fed chief himself described as "unprecedented" and deeply troubling for the independence of America's central bank.

In a video statement released on Sunday, Powell revealed that the US Justice Department served subpoenas on the Federal Reserve and threatened a criminal indictment. The probe relates to testimony Powell gave to a Senate committee regarding the costly renovation of two historic Federal Reserve buildings in Washington.

Powell openly suggested that the investigation followed his refusal to bow...