In what he called an “unprecedented action,” Federal Reserve Chair Jerome Powell said Sunday night that the U.S. Justice Department served the Fed with grand jury subpoenas and threatened a criminal indictment related to his testimony before the U.S. Senate.
Powell said he thought the DOJ’s action is not as much about his testimony but more is about a difference of opinion on interest rates. In a statement, he said the DOJ’s move should be seen in the broader context of the administration’s threats and ongoing pressure. Powell’s term as chair ends in May.
“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
The Chair defended his record, saying he has served both Republican and Democrat administrations and that he has always based his decisions only on the central bank’s dual goals of maximum employment and stable prices, as it is charged by Congress.
Yahoo! Finance reported that the subpoenas mark a major escalation in the yearlong struggle between the Trump administration and the Federal Reserve.
“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 at 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.”
Last year, Trump said he was still considering suing Powell over the central bank’s renovation of its headquarters, claiming Powell demonstrated “gross incompetence” in overseeing the project.
In July, during a rare visit to the Fed’s headquarters, the president wore a hard hat and toured the construction site alongside Powell, as the two publicly disagreed over the cost of the project’s overruns. Trump insisted the price tag had increased to $3.1 billion — an amount Powell disputed.
Trump told NBC News on Sunday that the subpoenas have nothing to do with interest rates.
“No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got,” Trump said.
“He’s hurt a lot of people,” Trump said. “I think the public is pressuring him.”
A Department of Justice spokesperson said in a statement that Attorney General Pam Bondi “has instructed her U.S. Attorneys to prioritize investigating any abuse of taxpayer dollars,” but did not refer to any specific case.
The Fed Releases Statement
Here is Powell’s complete statement released by The Fed:
“On Friday, the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. That testimony concerned in part a multi-year project to renovate historic Federal Reserve office buildings.
I have deep respect for the rule of law and for accountability in our democracy. No one—certainly not the chair of the Federal Reserve—is above the law. But this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure.
This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress’s oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation project. Those are pretexts. 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.
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.
I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. Public service sometimes requires standing firm in the face of threats. I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people.
Thank you.”
Politicians, Business Leaders React
The announcement by Powell drew responses from across the political and business landscape.
Sen. Thom Tillis, a the North Carolina Republican, said he would oppose Trump’s nominees for the Fed.
“If there were any remaining doubt about whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said in a statement.
Fellow Republican Sen. Lisa Murkowski of Alaska said Monday that, “After speaking with Chair Powell this morning, it’s clear the administration’s investigation is nothing more than an attempt at coercion.”
Murkowski added, “If the Department of Justice believes an investigation into Chair Powell is warranted based on project cost overruns —which are not unusual — then Congress needs to investigate the Department of Justice.” Murkowski said that Tillis is right to block any Federal Reserve chair nominees from the Trump administration.
Former Goldman Sachs Chief Executive Officer Lloyd Blankfein said this “feels like an attempt at murder-suicide.”
“Trying to kill the Fed’s independence by criminal investigation is not good for that institution, and maybe even worse for the Justice Department,” Blankfein wrote on X.
In a CNBC interview, Victoria Greene, the chief investment officer at G Squared Private Wealth, said that her firm is advising its clients to remain relaxed and avoid knee-jerk reactions to headlines.
“See how this plays out. It could be a little bit of a dip buying opportunity, we see multiple 5-10% pullbacks here,” Greene said. “FED independence is something we’re going to have to watch, especially what happens with bond yields.”
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