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U.S. President Donald Trump’s administration has ramped up its pressure campaign on the Federal Reserve, threatening to indict Chair Jerome Powell over comments to Congress about a building renovation project, an action Mr. Powell called a “pretext” to gain more influence over interest rates that Mr. Trump wants cut dramatically.
The latest development in a long-running effort by Mr. Trump for greater control over the Fed had immediate fallout, with Republican Senator Thom Tillis, a member of the Senate Banking Committee that vets presidential nominees for the Fed, saying the threatened indictment puts the Department of Justice’s “independence and credibility” in question. Mr. Tillis said he would oppose any Trump nominees to the Fed, including the coming choice of successor to Mr. Powell as Chair, “until this legal matter is fully resolved.”
At stake is the independence of the Fed — the world’s most important central bank — to set U.S. monetary policy without undue influence by elected officials like Mr. Trump who would prefer cheaper borrowing costs for their political appeal.
Mr. Powell — elevated to Fed Chair by Mr. Trump in 2018 — will complete his term as Fed leader in May, but he is not obligated to leave, and a number of analysts saw the latest move by the administration as adding to the chances of him staying on in defiance.
The action — emerging about two weeks before Mr. Trump’s effort to fire another Fed official, Governor Lisa Cook, will be argued before the Supreme Court — was met with a guarded reaction on Wall Street.
Investors have been warily watching as the sparring match between Mr. Trump and the Fed has played out ever since Mr. Trump was elected to a second term in November 2024 on promises to improve affordability for Americans after a run of high inflation.
The investigation and Mr. Powell’s pointed response sharply escalates a row that risks upending the independence of the Fed, a bedrock of U.S. economic policy and a cornerstone of its financial system, investors said.
The U.S. dollar fell by the most in three weeks on Monday (January 12, 2026). Gold shot to a record high, U.S. stock futures dropped and markets priced in a slightly higher chance of short-term interest rate cuts.
“Tonight’s revelations mark a dramatic escalation in the administration’s effort to kick the legs out from under the Fed, and could unleash a series of unintended consequences that go directly against President Trump’s stated aims,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
‘THREATS AND ONGOING PRESSURE’
Mr. Trump’s officials’ latest salvo was revealed late Sunday (January 11, 2026) by Mr. Powell, who said the Fed had received subpoenas from the Justice Department last week pertaining to remarks he made to Congress last summer over cost overruns for a $2.5 billion building renovation project at the Fed’s headquarters complex in Washington.
“On Friday [January 9, 2026], the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June,” Mr. Powell said. “I have deep respect for the rule of law and for accountability in our democracy. 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” for lower interest rates and more broadly for greater say over the Fed, he 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…Those are pretexts. 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.”
Mr. Trump told NBC News on Sunday (January 11, 2026) that he had 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,” Mr. Trump said.
A Justice Department spokesperson declined to comment on the case but added: “The Attorney General has instructed her U.S. Attorneys to prioritize investigating any abuse of taxpayer dollars.”
Powell inquiry a ‘low point’ in Trump presidency
Mr. Trump has demanded the Fed cut rates sharply since resuming office in January, blaming its policy for holding back the economy and musing about firing Mr. Powell despite the legal protections ostensibly covering the Fed Chair from removal.
The independence of central banks, at least in setting interest rates in order to control inflation, is considered a central tenet of robust economic policy, insulating monetary policymakers from short-term political considerations and allowing them to focus on longer-term efforts to keep prices relatively stable.
The inquiry into Mr. Powell “is a low point in Trump’s presidency and a low point in the history of central banking in America,” said Peter Conti-Brown, a Fed historian at the University of Pennsylvania.
“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.”
Published – January 12, 2026 03:53 pm IST
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Trump team ramps up attack on Federal Reserve Chair Powell with criminal indictment threat
