Jerome Powell, the Chair of the Federal Reserve, has publicly linked a criminal investigation by the Department of Justice (DOJ) to his resistance against pressure from President Trump to lower interest rates. The investigation, initiated by the U.S. attorney's office in the District of Columbia, centers around Powell's testimony before the Senate Banking Committee in June of last year regarding renovations to the Fed's historic office buildings in Washington D.C..

Powell, in a video statement, announced that the Fed was served with grand jury subpoenas on Friday. He characterized the DOJ's actions as an "unprecedented challenge" to the central bank's independence, viewing the threat of criminal charges as a consequence of the Federal Reserve setting interest rates based on its assessment of what would best serve the public, rather than adhering to the President's preferences.

The investigation includes scrutiny of Powell's public statements and spending records related to the building renovations. Administration officials had previously alleged that Powell either lied to Congress about the scope and cost or mismanaged the renovation project. Powell has denied these allegations. A DOJ official confirmed the inquiry, adding that Attorney General Pam Bondi has prioritized investigating potential abuses of taxpayer dollars.

Trump has repeatedly attacked Powell and the Fed for not implementing rapid rate cuts, aiming to stimulate economic growth. The Fed, while having started to cut rates, has moved more cautiously, citing concerns about inflation and the impact of tariffs imposed by the Trump administration. Trump has publicly mused about firing Powell and has called for interest rates to be significantly lower.

The Fed's decisions to hold rates steady have led to repeated criticism from Trump, who argues that lower rates are needed to boost the economy. Powell has maintained the importance of the Fed's independence from political pressure, asserting that monetary policy should be guided by economic data.

The investigation raises concerns about the politicization of the Justice Department and potential overreach by the executive branch into the affairs of the Federal Reserve. Senator Thom Tillis has voiced concerns about the independence of the Federal Reserve in light of the inquiry. Some legal experts believe that Trump does not have the authority to fire Powell without cause.

Powell's term as Fed chair is set to end in May 2026, and Trump is expected to nominate a replacement. Kevin Hassett and Kevin Warsh are considered frontrunners for the position, both of whom reportedly support Trump's stance on lower interest rates.