Trump's DOJ launches criminal investigation of Fed chair Powell

Driving the news: The New York Times reported that federal prosecutors have opened an inquiry into Powell's testimony about the renovation project before Congress.

• The cost of renovating two historic buildings on the National Mall has swelled to $2.5 billion, and Powell denied before Congress that luxury features were the reason.
• The Fed on Friday received grand jury subpoenas, threatening a criminal indictment, Powell said in his statement.

Between the lines: The investigation represents an unprecedented effort to apply pressure on a central banker whom Trump initially appointed to the Fed chairmanship eight years ago — but whom he has pilloried since for not pushing interest rates lower.

• Powell's unusually blunt statement on Sunday said that the investigation was a pretext to pressure the Fed over interest rate policy.

What they're saying: "No one — certainly not the chair of the Federal Reserve — is above the law," Powell said in a video issued by the Fed.

• "But this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure," Powell said.
• "This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role; the Fed through testimony and other public disclosures made every effort to keep Congress informed about the renovation
  project," he added.
• "Those are pretexts," Powell continued. "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."
• "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."
• The White House referred a request for comment to the Justice Department. A Justice Department spokesperson did not immediately respond to a request for comment.

The other side: Trump on Sunday told NBC News he didn't "know anything about" the Justice Department's probe.

• Asked whether the subpoenas were related to his desire for lower interest rates, Trump said: "No. I wouldn't even think of doing it that way. What should pressure him is the fact that rates are far too high. That's the only pressure he's got."

State of play: Trump has unleashed an extraordinary campaign against the Federal Reserve throughout his first year in office in an effort to get lower interest rates.

• Last year, Trump threatened on multiple occasions to fire Powell, citing issues related to the Federal Reserve's building renovations.
• Trump visited the construction site over the summer with White House officials, appearing alongside Powell before reporters.

Zoom in: The new investigation brings those efforts back to the forefront.

• Treasury Secretary Scott Bessent — among the top Trump officials who have called for lower rates — said last week that news of Powell's replacement might come as soon as this month.
• Top White House economist and longtime Trump loyalist Kevin Hassett appears to be a likely candidate to get the nod. But whoever takes the job might still have to deal with Powell for a few more years; his term on the Fed's board of governors does not expire until 2028.
• Powell has not said whether he will stay on.

What to watch: The investigation threatens to impact the confirmation process for Trump's future Fed chair pick and other central bank nominees.

• "I will oppose the confirmation of any nominee for the Fed — including the upcoming Fed Chair vacancy — until this legal matter is fully resolved," Sen. Thom Tillis, a North Carolina Republican on an important banking committee, said in a statement on Sunday night.
• Any Fed official needs to be confirmed by the banking panel before moving on to a full Senate vote.
• Republicans have just a two-seat majority on the Senate Banking Committee. Losing even one Republican — like Tillis — could derail the nomination.

Of note: The Fed cut interest rates three times in the second half of 2025 to shield the weakening labor market, though Powell suggested that the central bank might move more slowly this year in deciding whether to cut rates further — in part because inflation remains above its 2% target.

• Trump has not been satisfied with those cuts, saying that rates should be at rock-bottom levels — a demand he says the next Fed chair will need to comply with.

Editor's note: This story has been updated with additional details.