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Federal Reserve Chair Jerome Powell said the US central bank had been served grand jury subpoenas from the Justice Department threatening a criminal indictment, a dramatic escalation of the Trump administration\u2019s attacks on the institution.<\/p>\n
In a forceful written and video statement released Sunday evening, Powell said the action was related to his June congressional testimony on ongoing renovations of the Fed\u2019s headquarters. But he said the move \u201cshould be seen in the broader context of the administration\u2019s threats and ongoing pressure.\u201d<\/p>\n
\u201cThe threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,\u201d Powell said.<\/p>\n
Powell added, \u201cThis is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions \u2014 or whether instead monetary policy will be directed by political pressure or intimidation.\u201d<\/p>\n
In an interview with NBC News on Sunday, President Donald Trump denied having any knowledge of the DOJ\u2019s investigation into the central bank.<\/p>\n
US stock futures and the dollar weakened on the news, while gold extended gains to a record high. Futures on the S&P 500 Index fell as much as 0.7%.<\/p>\n
Powell said the Fed was served the subpoenas on Friday. The unprecedented move by the Trump administration marks an escalation of the president\u2019s longstanding feud with the central bank\u2019s chair. The president has repeatedly called for aggressive rate cuts, arguing the Fed should be acting to boost housing affordability and ease the government\u2019s borrowing costs.<\/p>\n
He\u2019s also long mused about firing Powell, and, in another extraordinary step, has sought to fire Fed Governor Lisa Cook. The Supreme Court is set to take up the Cook case later this month.<\/p>\n
Fed policymakers last month cut their benchmark rate to a target range of 3.5% to 3.75% \u2014 the third consecutive quarter-point cut, after holding rates steady through much of 2025. Officials have signaled they\u2019re in no rush to lower rates again until they have more data on inflation and jobs.<\/p>\n
Policymakers next meet January 27-28, and futures trading shows a minimal chance of a move at that gathering.<\/p>\n
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In the statement, Powell said he intends to continue doing his job \u201cwith integrity and a commitment to serving the American people.\u201d<\/p>\n
Powell was first elevated to the chair role in 2018 by Trump. While his current term as chair will expire in May, his underlying post as a Fed governor doesn\u2019t end until 2028. He hasn\u2019t indicated whether he intends to depart in May or stay on at the central bank.<\/p>\n
Trump said he has already picked his nominee to replace Powell. He has not named Powell\u2019s successor, but Kevin Hassett, the director of the National Economic Council, is a front-runner.<\/p>\n
Republican Senator Thom Tillis, a member of the Senate Banking Committee which oversees the Fed, came to the central bank\u2019s defense on Sunday night. In a statement he pledged to \u201coppose the confirmation of any nominee for the Fed \u2014 including the upcoming Fed chair vacancy \u2014 until this legal matter is fully resolved.\u201d<\/p>\n
Without Tillis\u2019 support, Republicans would face a significant hurdle to advance any nominee out of the committee to the full Senate for confirmation.<\/p>\n
\u201cIf there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question,\u201d Tillis said.<\/p>\n
The investigation is being run by the US Attorney\u2019s Office for the District of Columbia, according to people familiar with the matter.<\/p>\n
Attorney General Pam Bondi has directed US attorneys\u2019 offices to look into cases of potential taxpayer abuse, said one of the people, who asked not to be identified discussing the probe.<\/p>\n
The White House referred questions to the Justice Department. A spokesperson for the Justice Department didn\u2019t immediately respond to a request for comment.<\/p>\n
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The Trump administration last summer ramped up scrutiny over the Fed\u2019s renovation of two historic buildings and rising costs associated with the project. Fed budget documents show cost estimates for the project had risen to $2.5 billion in 2025, compared with $1.9 billion in 2023.<\/p>\n
The Fed has attributed the higher costs in part to differences between original and actual estimates for materials, equipment and labor, and unforeseen issues, such as toxic contamination.<\/p>\n
In testimony last June, Powell broadly disputed media reports, and criticisms from administration officials and some congressional Republicans, that the project had extravagant design features, such as a VIP dining room and roof terrace gardens.<\/p>\n
Powell also said during the testimony that the project\u2019s plans had \u201ccontinued to evolve\u201d and that some earlier features \u201care no longer in the plans.\u201d<\/p>\n
Office of Management and Budget Director Russ Vought referenced the testimony in a letter he sent to Powell last July asking for details on the renovation. Bill Pulte, director of the Federal Housing Finance Administration and a fierce critic of Powell, has alleged \u2013 without providing details \u2013 that Powell lied about the specifics of the project during the hearing and suggested the matter could amount to sufficient legal \u201ccause\u201d to justify removing the Fed chief from his role.<\/p>\n
At the time, Republican Representative Anna Paulina Luna also asked the DOJ to consider investigating and prosecuting Powell for allegedly lying under oath in his testimony.<\/p>\n
Amid the controversy, Trump toured the renovation site and signaled the project was not reason enough to fire Powell. Months later, on Dec. 29, Trump said he was considering a \u201cgross incompetence\u201d lawsuit against Powell related to the project.<\/p>\n
Under the law that created the Fed, the president can remove members of the Board of Governors only for cause, generally interpreted to mean inefficiency, malfeasance in office or neglect of duty.<\/p>\n
\u201cIt sounds like Trumpian vengeance and pressuring him to leave in May,\u201d Mark Spindel, author of The Myth of Independence: How Congress Governs the Federal Reserve<\/em>, said in reaction to the subpoenas. \u201cIf Powell hung around on the board, that complicates Trump\u2019s majority \u2014 he needs the seats.\u201d<\/p>\n \u00a9 2026 Bloomberg<\/p>\n Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n