U.S. Federal Reserve Jerome Powell alleged on Sunday evening that a Department of Justice probe into the central bank’s recent renovation project was politically motivated, as the Donald Trump administration continued its calls for lower interest rates.
Shortly after Powell’s statement, Trump told NBC he did not have any knowledge about the DOJ’s investigation.
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Powell said the DOJ had last week served the Fed with grand jury subopenas and was threatening a criminal indictment related to his June 2025 testimony before Congress regarding the renovation project.
"This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings... those are pretexts" Powell said in a statement published on the Fed’s website.
"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.
Powell’s statement came shortly after reports said prosecutors are looking into whether Powell lied to Congress about the scope and full cost of the Fed’s renovation. The investigation includes an analysis of Powell’s public statements and the Fed’s spending records.
"The threat to prosecute Powell appears designed... to ensure he resigns as a governor on May 15 when his term expires as Fed chair," analysts at TD Cowen said in a note.
"Our concern is that this will lead to higher interest rates as the market questions the Fed’s ability to respond if there are signs of inflation," TD analysts said. "We worry this could slow deregulatory efforts on capital and tiering as those must go before the Fed board."
The Fed Chair’s comments are his most direct yet in addressing increasing political pressure on the central bank from Trump. The president had repeatedly attacked Powell in the past year for resisting his demands to bring down interest rates sharply.
The Fed cut interest rates by a cumulative 75 basis points in 2025, much smaller than the over 2% cuts demanded by Trump. Powell cited caution over inflation and the impact of Trump’s policies as reasons for the smaller cuts.
The president’s repeated badgering of the Fed sparked heightened concerns over the central bank’s independence from the government. The central bank is traditionally expected to set monetary policy without any direct interference from the White House.
"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," Powell said on Sunday.
The Trump administration is also embroiled in a legal battle with Fed Governor Lisa Cook, who Trump had attempted to fire over allegations of mortgage fraud. The Supreme Court is set to rule on the matter later in January.
