WASHINGTON — Federal Reserve Chair Jerome Powell said Sunday that the U.S. Department of Justice has served subpoenas on the central bank and raised the possibility of criminal charges tied to his congressional testimony, a development he warned threatens the independence of the nation’s monetary authority.
Powell said the subpoenas stem from his June appearance before the Senate Banking Committee, where he addressed questions about a $2.5 billion renovation of two Federal Reserve office buildings in Washington.
He said the Justice Department has also signaled the possibility of a criminal indictment.
Powell described the actions as an unprecedented escalation in the Trump administration’s long-running dispute with the Federal Reserve, an independent institution that President Donald Trump has repeatedly criticized for not cutting interest rates more aggressively.
In a rare and forceful public response, Powell released a video statement Sunday rejecting the basis of the investigation and framing the threat of prosecution as political pressure.
“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.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether monetary policy will be directed by political pressure or intimidation,” he added.
The comments mark a sharp departure from Powell’s typically restrained approach to public criticism, particularly toward the president who appointed him in 2017.
Until now, Powell has largely avoided responding directly to Trump’s personal attacks and policy complaints, opting instead to emphasize the Fed’s statutory mandate and independence.
The dispute is likely to reverberate through financial markets when trading resumes Monday.
Analysts warned the confrontation could undermine investor confidence in U.S. institutions and push up borrowing costs over time.
Krishna Guha, an analyst at investment bank Evercore ISI, said the development could trigger broad market declines.
“We expect the dollar, bonds and stocks to all fall in Monday trading in a sell-America trade similar to that seen last year at the peak of the tariff shock and earlier threats to Powell’s position,” Guha wrote in a note to clients.
“We are stunned by this deeply disturbing development, which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained,” he added.
The subpoenas relate to Powell’s testimony about the scope and cost of the Fed’s renovation project, which Trump and some Republican lawmakers have criticized as extravagant.
At the June Senate Banking Committee hearing, Chairman Tim Scott of South Carolina accused the Fed of installing luxury features including rooftop terraces, VIP dining elevators, white marble finishes and a private art collection.
Powell disputed those claims under oath.
“There’s no new marble,” Powell told lawmakers. “There are no special elevators,” he said, adding that some features cited by critics were not part of the current construction plan.
In July, Russell Vought, director of the Office of Management and Budget, wrote to Powell saying the testimony “raises serious questions” about whether the renovation complies with previously approved plans.
Later that month, President Trump visited the renovation site alongside Powell and publicly overstated the cost of the project while standing next to the Fed chair.
Trump later downplayed the issue, telling reporters that renovations inevitably draw criticism.
“They have to get it done,” Trump said at the time. “There’s always Monday morning quarterbacks. I don’t want to be that.”
Asked whether the renovation constituted grounds for firing Powell, Trump replied, “I don’t want to put that in this category.”
In a brief interview with NBC News on Sunday, Trump said he was unaware of any investigation involving Powell.
When asked whether the probe was intended to pressure the Fed on interest rates, Trump responded, “No. I wouldn’t even think of doing it that way.”
The Justice Department said Sunday that it could not comment on specific cases.
In a statement, the department said Attorney General Pam Bondi has instructed U.S. attorneys to prioritize investigations involving potential misuse of taxpayer funds.
Timothy Lauer, a spokesperson for the office of U.S. Attorney Jeanine Pirro, declined to comment, citing ongoing investigations.
Powell’s term as Fed chair ends in May, and administration officials have indicated that Trump could name a potential successor as early as this month.
The president has also sought to remove Federal Reserve Governor Lisa Cook, an unprecedented move that has sparked legal challenges.
Cook has sued to retain her position, and courts have allowed her to remain in office while the case proceeds. The Supreme Court is scheduled to hear arguments on Jan. 21.
With the subpoenas, Powell becomes the latest perceived adversary of the president to face a criminal investigation by the Trump administration’s Justice Department.
Trump has publicly urged the prosecution of political opponents, eroding longstanding norms designed to insulate law enforcement decisions from White House influence.
The potential indictment has already prompted concern on Capitol Hill.
One Republican senator said he would oppose all future Federal Reserve nominees, including any replacement for Powell, until the matter is resolved.
Sen. Thom Tillis of North Carolina, a member of the Senate Banking Committee, said the situation raises fundamental questions about institutional independence.
“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said.
“It is now the independence and credibility of the Department of Justice that are in question,” he added.
The confrontation between Powell and the Justice Department represents one of the most direct challenges to Federal Reserve independence in modern U.S. history.
While presidents have frequently criticized the Fed, the use of criminal investigative tools against a sitting chair over disputed testimony risks blurring the line between oversight and coercion.
Markets rely heavily on the perception that U.S. monetary policy is insulated from political influence. Any erosion of that confidence could have long-term consequences for Treasury markets, inflation expectations and the dollar’s role as a global reserve currency.
The timing is also significant.
With Powell’s term nearing its end and interest rate decisions carrying heightened political stakes in an election cycle, the threat of prosecution could be interpreted by investors as a warning to future Fed leaders.
Regardless of how the investigation unfolds, the episode underscores how institutional guardrails that once constrained political interference are being tested in ways that could permanently reshape the balance between the White House, the Justice Department and the nation’s central bank.
