In a dramatic escalation of tensions between the White House and the Federal Reserve, the Trump administration has threatened to indict Federal Reserve Chair Jerome Powell, raising concerns about the Fed's independence and the politicization of monetary policy.

Powell revealed that the Department of Justice served the Federal Reserve with grand jury subpoenas on Friday, threatening a criminal indictment related to his testimony before the Senate Banking Committee in June. The testimony concerned the Fed's US$2.5 billion renovation of two office buildings, a project that President Trump has publicly criticized as excessive.

Powell, in a statement released Sunday night, characterized the threat of criminal charges as a "pretext" to gain influence over the central bank and its monetary policy decisions. He stated that the action should be viewed within the broader context of the administration's ongoing pressure for lower interest rates and greater control over the Fed. "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.

Trump, in an interview with NBC News on Sunday, claimed to have no knowledge of the Justice Department's actions. "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.

The threatened indictment has sparked immediate backlash, with Republican Senator Thom Tillis, a member of the Senate Banking Committee, condemning the action and questioning the independence and credibility of the Department of Justice. Tillis stated that he would oppose any Trump nominees to the Fed, including the president's upcoming choice for a new chair, until the legal matter is fully resolved.

This marks a significant turning point in the long-standing battle between Trump and Powell. While Trump has repeatedly attacked the Fed for not lowering interest rates quickly enough, Powell has largely avoided commenting on the president's remarks. However, with the threat of criminal charges, Powell has adopted a more forceful stance, directly accusing the administration of attempting to undermine the Fed's independence.

The Justice Department has not commented on the specific case but stated that Attorney General Pam Bondi has instructed US attorneys to prioritize investigating any abuse of taxpayer dollars.

Some observers have noted that Powell is among a number of officials and politicians who Trump perceives as adversaries to face indictment or the threat of prosecution by the Trump administration’s justice department.

Peter Conti-Brown, a Fed historian at the University of Pennsylvania, called the inquiry into Powell "a low point in Trump's presidency and a low point in the history of central banking in America". He added, "Congress did not design the Fed to reflect the president's daily fluctuations, and because the Fed has rebuffed President Trump's efforts to take the Fed down he is launching the full weight of American criminal law against its chair".

The unfolding situation has already impacted the markets, with the U.S. dollar weakening and gold prices rising. The coming days and weeks will be critical in determining the future of the Fed's independence and the implications for the U.S. economy.