Powell Targeted by DOJ, Is the Fed's Independence Threatened?
Federal Reserve Chairman Jerome Powell revealed that the Fed received a grand jury subpoena from the Department of Justice (DOJ) that raises the possibility of criminal charges. This marks the most dramatic escalation in the Trump administration's pressure on the US central bank.
In a written statement and video released Sunday night, Powell said the legal action was related to his testimony to Congress in June about the Fed's headquarters renovation project. But he emphasized that the renovation issue was only "scratch-the-surface," as the larger context is persistent political pressure.
Powell said the criminal threat arose because the Fed sets interest rates based on its judgment of the public interest, rather than following the President's preferences. He said the core issue is whether monetary policy will still be decided based on economic data, or instead be guided by political intimidation.
The market reacted immediately. US stock and dollar futures weakened, while gold continued to rise to a record high. S&P 500 futures briefly fell, indicating that investors view the issue as more than just political drama, but a systemic risk.
Powell said the subpoena was received on Friday. This extends the long-running Trump-Powell conflict, in which Trump has repeatedly pushed for aggressive interest rate cuts, arguing it would ease government borrowing costs and improve housing affordability. Trump has also floated the idea of replacing Powell and even hinted at replacing other Fed officials.
On the policy front, the Fed has previously cut interest rates to a range of 3.5%–3.75% and has signaled they are in no rush to cut them again until they have clearer inflation and employment data. Powell has asserted that he will continue to perform his duties with integrity, even though his term as chairman ends in May (while his term as Fed governor runs until 2028).
The renovation issue has become a key point of attack: the project's cost is said to have increased from approximately $1.9 billion (2023) to $2.5 billion (2025). Powell has denied allegations of lavish features and said some plans have changed. However, criticism from government officials and some politicians continues to push the narrative that Powell "misled" Congress—which is now the basis for more serious legal pressure.
5 Key Points:
- Powell said the Fed received a grand jury subpoena from the DOJ leading to the threat of criminal charges.
- The case is linked to June's testimony about the Fed's headquarters renovation, but Powell believes this is part of political pressure.
- Powell emphasized the key issue: the Fed's independence versus political intimidation in interest rate setting.
- Markets reacted: the dollar and stock futures weakened, gold continued to strengthen to a record.
- The Trump-Powell conflict escalated as Trump pushed for aggressive rate cuts, while the Fed was still awaiting inflation and employment data. (asd)
Source: Bloomberg
