Federal Reserve Chairman Jerome Powell said the US central bank has been threatened with criminal indictment by being sent a grand jury subpoena from the Justice Department, a dramatic escalation in the Trump administration’s attacks on the Fed.
In a forceful written and video statement released Sunday evening, Powell said the action was related to his June congressional testimony on the ongoing renovation of the Fed’s headquarters. But he said the move “must be seen in the broader context of the administration’s threats and ongoing pressure.”
“The threat of criminal charges is the result of the Federal Reserve setting interest rates based on our best assessment of serving the public rather than following the President’s preferences,” Powell said.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether monetary policy will instead be guided by political pressure or intimidation,” Powell said.
The news weakened the US dollar and fell against all its major counterparts, while gold reached record highs. Futures on the S&P 500 index fell 0.3%.
The unprecedented move by the Trump administration marks an escalation of President Donald Trump’s long-running dispute with the Fed chair. The President has repeatedly called for aggressive rate cuts, arguing that the Fed should act to boost housing affordability and reduce the government’s borrowing costs.
He has also long considered firing Powell, and in another extraordinary move, he has called for the firing of Fed Governor Lisa Cook. The Supreme Court is scheduled to hear the Cook case later this month.
Fed policymakers last month cut their benchmark rate to a target range of 3.5% to 3.75% — its third consecutive quarter cut, after keeping rates steady through 2025. Officials have signaled they are in no rush to lower rates again until they have more data on inflation and jobs.
Policymakers next meet on Jan. 27-28, and futures trade shows minimal chances of any action at that meeting.
Powell’s future
In the statement, Powell said he looks forward to continuing his work “with integrity and commitment to serving the American people.”
Powell was first promoted to the role of chairman by Trump in 2018. While his current term as chairman will end in May, his underlying position as Fed governor will not expire until 2028. He has not indicated whether he intends to depart in May or remain at the central bank.
Trump said he has already selected his candidate to replace Powell. He has not named Powell’s successor, but National Economic Council Director Kevin Hassett is the frontrunner.
Republican Senator Thom Tillis, a member of the Senate Banking Committee that oversees the Fed, came to the Fed’s defense Sunday night. In a statement he said he would “oppose the confirmation of any nominee to the Fed – including for the upcoming Fed Chair vacancy – until this legal matter is fully resolved.”
Without Tillis’ support, Republicans will face a significant hurdle in advancing any nominee out of committee to the full Senate for confirmation.
Tillis said, “If there was any doubt whether Trump administration advisers were actively pushing to dismantle the independence of the Federal Reserve, there should no longer be any doubt. It is now the independence and credibility of the Justice Department that is in question.”
The investigation is being conducted by the U.S. Attorney’s Office for the District of Columbia, according to people familiar with the matter.
Attorney General Pam Bondi has directed U.S. attorneys’ offices to look into potential taxpayer abuse cases, said one of the people, who asked not to be identified discussing the investigation.
The White House referred questions to the Justice Department. A Justice Department spokesperson did not immediately respond to a request for comment.
renewal
The Trump administration stepped up scrutiny from the feds last summer over the renovation of two historic buildings and the rising costs associated with the project. The project’s cost estimate has risen to $2.5 billion in 2025, from $1.9 billion in 2023, Fed budget documents show.
The Fed attributed the high costs to differences between original and actual estimates for materials, equipment and labor, and unexpected issues such as toxic contamination.
In testimony last June, Powell largely denied media reports and criticisms from administration officials and some congressional Republicans that the project had extravagant design features such as VIP dining rooms and a rooftop terrace garden.
Powell also said during testimony that plans for the project “continue to evolve” and that some earlier features “are no longer in the plans.”
Office of Management and Budget Director Russ Vought cited the testimony in a letter sent to Powell last July asking for details on the renewal. Bill Pulte, director of the Federal Housing Finance Administration and a staunch critic of Powell, has alleged, without giving details, that Powell lied about the specifics of the project during the hearing and suggested that the matter might be enough legal “reason” to justify removing the Fed chief from his role.
At the time, Republican Representative Anna Paulina Luna also asked the DOJ to investigate and consider prosecuting Powell for allegedly lying under oath in her testimony.
Amid the controversy, Trump visited the renovation site and indicated that the project was not reason enough to fire Powell. Months later, on December 29, Trump said he was considering a lawsuit against Powell for “gross incompetence” related to the project.
Under the law that created the Fed, the President can remove members of the Board of Governors only for reasons generally construed to mean incompetence, misconduct in office, or neglect of duty.
Mark Spindell, author of The Myth of Independence: How Congress Governs the Federal Reserve, said in response to the subpoena, “This feels like retaliation for Trump and pressuring him to step down in May.” “If Powell hangs on to the board, it complicates Trump’s majority — he needs seats.”
