Federal Reserve Chair Jerome Powell said the U.S. Department of Justice served the central bank with subpoenas and threatened a criminal indictment over his testimony this summer about renovations to Fed buildings.
Powell made the remarks Sunday in a video statement. He said the subpoenas and the criminal-threat language are part of a broader push to weaken the Fed’s independence when it sets interest rates, rather than a dispute focused on whether the Fed is following the kinds of preferences the president wants.
“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. “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 said the subpoenas relate to his testimony before the Senate Banking Committee in June. AP reported that he was addressing the Fed chair’s account of the Fed’s $2.5 billion renovation of two office buildings—an issue that President Donald Trump has criticized as excessive.
The reported escalation comes as Trump has repeatedly attacked the Fed for not cutting its key interest rate as sharply as he prefers. AP said the renewed fight is likely to shake financial markets Monday and, over time, could increase borrowing costs for mortgages and other loans.
At the center of the dispute are questions raised during the Senate hearing about what the renovation would include. AP reported that Chairman Tim Scott, a Republican from South Carolina, said the renovation involved “rooftop terraces, custom elevators that open into VIP dining rooms, white marble finishes, and even a private art collection.”
In his June testimony, AP said Powell disputed those details, saying “there’s no new marble. … there are no special elevators” and that some of the items Scott referenced are “not in the current plan.” AP also reported that in July, Russell Vought, director of the Office of Management and Budget, wrote Powell that the testimony “raises serious questions about the project’s compliance” with earlier plans approved by a planning commission.
Trump has also publicly weighed in at various points about the project, including visiting the building site while standing next to Powell, AP reported, and overstating the renovation’s cost. Later, AP said, Trump told reporters, “they have to get it done” and, “Look, there’s always Monday morning quarterbacks. I don’t want to be that. I want to help them get it finished.”
In a brief Sunday interview with NBC News, AP reported that Trump said he didn’t know about the investigation into Powell. When asked whether the investigation is intended to pressure Powell on rates, AP said Trump responded, “No. I wouldn’t even think of doing it that way.”
AP reported that the Justice Department said in a statement Sunday it cannot comment on any particular case. It added that Attorney General Pam Bondi instructed U.S. attorneys to prioritize investigating any abuse of taxpayer dollars. AP also reported that a spokesperson for U.S. Attorney Jeanine Pirro’s office, Timothy Lauer, said they do not comment on ongoing investigations.
Markets analysts warned that the confrontation could quickly become a broader worry about political interference. In a client note, Krishna Guha of Evercore ISI wrote that the dollar, bonds and stocks would likely all fall Monday “in a sell-America trade similar to that in April last year at the peak of the tariff shock.” He added that he was “stunned by this deeply disturbing development which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained.”
Powell’s term ends in May, and AP reported that Trump administration officials have signaled that he could name a potential replacement this month. AP also said Trump sought to fire Fed governor Lisa Cook; Cook sued to keep her job, and the Supreme Court will hear arguments in that case Jan. 21.
Several politicians tied the subpoenas to the Fed independence question. AP reported that Republican Sen. Thom Tillis said, “If 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,” and added that “It is now the independence and credibility of the Department of Justice that are in question.”