Justice department opens investigation into Jerome Powell as Trump ramps up campaign against Federal Reserve

The Department of Justice has opened a criminal investigation into Jerome Powell and the Federal Reserve, a significant escalation in Donald Trump’s extraordinary attack on the US central bank.

Powell said the Department of Justice had served the Fed with grand jury subpoenas on Friday, threatening a criminal indictment related to his testimony before the Senate banking committee in June last year, regarding renovations to the Fed’s historic office buildings in Washington DC.

The US attorney’s office in the District of Columbia has opened a criminal investigation into Powell over the project, and whether Powell lied to Congress about its scope, the New York Times reported on Sunday.

Allies of Trump spent months last year accusing the Fed of mishandling the multibillion-dollar renovations. Trump had repeatedly threatened legal action.

In a blistering statement on Sunday, Powell argued he had been threatened with criminal charges because the Fed had set interest rates “based on our best assessment of what will serve the public, rather than following the preferences of the president”.

Trump has repeatedly blasted Powell and the Fed for declining to bow to his demands for rapid rate cuts, and launched an aggressive campaign to curtail the central bank’s longstanding independence – and exert greater control over its decisions.

The Trump administration has already installed a close ally of the president onto the Fed’s powerful board of governors, and sought to fire Lisa Cook, a governor appointed by Joe Biden, over unconfirmed allegations of mortgage fraud.

The US attorney’s office inquiry, which includes an analysis of Powell’s public statements and an examination of spending records, was approved in November by Attorney Jeanine Pirro, the NYT reported, citing officials briefed on the situation.

In a statement on Sunday evening, Powell insisted the legal threat was “not about” his testimony last summer, or congressional oversight of 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,” he said.

“I have served at the Federal Reserve under four administrations, Republicans and Democrats alike,” Powell added. “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.”

Contacted for comment, the White House deferred to the Department of Justice, which did not immediately respond to a request for comment.

Powell, initially appointed by Trump, and reappointed by Biden, has chaired the Fed since 2018. His term as chairman is due to expire in May – at which time Trump’s chosen successor can take his place – although Powell can remain on the Fed’s board of governors until 2028.

As US inflation surged to its highest level in a generation after the pandemic, the Fed scrambled to raise interest rates in 2022 and 2023 – ultimately lifting them to their highest level in two decades – in a bid to cool the world’s largest economy.

While the central bank had started to cut rates by the time Trump returned to office last year, he publicly called on Powell to move faster. Lower rates can stimulate economic growth – and Trump had repeatedly promised a new golden age for the US economy on his watch.

But Fed officials, including Powell, grew cautious. Trump’s economic agenda, including the erratic rollout of sweeping US tariffs on goods from across the world, clouded the outlook. They wanted to tread carefully – and did so, repeatedly opting to hold rates steady, and defying the president’s demands for drastic cuts.

“I have deep respect for the rule of law and for accountability in our democracy,” Powell said on Sunday. “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.”