Federal Reserve Chair Jerome Powell revealed Sunday night that the Justice Department served the central bank with grand jury subpoenas, threatening a criminal indictment related to Powell’s testimony before the US Senate.
Powell suggested the action isn’t so much about his testimony as it is about a difference of opinion on interest rates. In a statement, he stressed what he called “unprecedented action” that should be seen in the broader context of the administration’s threats and ongoing pressure.
“The 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,” Powell said in a recorded video.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation.”
Powell defended his record, noting that he has served at the Fed under both Democrats and Republicans and has always based his decisions solely on the central bank’s dual goals of maximum employment and stable prices, as charged by Congress.
The Justice Department’s subpoenas marks a significant escalation in the yearlong struggle between the administration and the Fed.
“On the face of it, it looks as if the administration and the central bank are now in open war — something Powell and Treasury Secretary Bessent have tried strenuously to avoid,” said Krishna Guha, head of global policy and central banking strategy for Evercore ISI. “The severity of the response will shape what happens next, establish whether Fed independence still has a guarantor in the market, and influence whether Bessent or Republicans in Congress seek to broker an off-ramp.”
Trading barbs over rates and renovations
Before the New Year turned, President Trump said he was still considering suing Powell over the Fed’s renovation of its headquarters, claiming he demonstrated “gross incompetence” in overseeing the project.
In a rare visit to the Fed’s headquarters in July, Trump donned a hardhat and the toured construction site alongside Powell, as the two disagreed publicly over the cost of the project’s overruns. Trump claimed the price tag had increased to $3.1 billion — an amount Powell disputed.
Powell testified before the Senate Banking Committee in June that media reports about the renovations were misleading and inaccurate in many respects. He told lawmakers there were no “special elevators,” new water features, or rooftop gardens, disputing claims made by Office of Management and Budget Chair Russell Vought of leading an “ostentatious” office renovation project that may be “violating the law.”
Trump has repeatedly blasted Powell for not cutting interest rates as much and as quickly as the president has demanded.
Trump told NBC News on Sunday night that he knew nothing about the Justice Department probe.
“I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings,” Trump said.
Asked about Powell’s assertion that the subpoenas were a means of pressuring the Fed to lower rates, Trump said, according to NBC, “No. I wouldn’t even think of doing it that way.”
“What should pressure him is the fact that rates are far too high,” Trump continued. “That’s the only pressure he’s got.”
The Fed held benchmark rates steady through most of 2025, then voted for quarter-point cuts in September, October and December, bringing rates down to a range of 3.5%-3.75%.
“Public service sometimes requires standing firm in the face of threats,” Powell said Sunday. “I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.”
