According to Reuters reports a major escalation in the ongoing conflict between U.S. President Donald Trump’s administration and Federal Reserve Chair Jerome Powell.
The Trump team has intensified pressure on the Fed through the Department of Justice issuing grand jury subpoenas to the Federal Reserve, threatening a criminal indictment against Powell.
This stems from his June 2025 testimony to the Senate Banking Committee about cost overruns in a $2.5 billion renovation project at the Fed’s Washington headquarters.
Powell, in a rare public statement (including a video address), described the subpoenas—served on Friday—as an “unprecedented” action and a mere pretext.
He argued that the real motive is to intimidate the Fed into slashing interest rates more aggressively, aligning with Trump’s repeated demands for lower borrowing costs to boost economic affordability.
Powell emphasized: “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.”
Escalation in Trump-Fed Tensions
This move marks a dramatic intensification of Trump’s long-standing feud with Powell, whom he appointed in 2018 during his first term.
Trump has repeatedly criticized the Fed for not cutting rates fast enough, even musing about firing Powell despite legal protections for the chair’s independence (Powell’s term ends in May 2026).
The administration has also targeted other Fed officials, such as Governor Lisa Cook. A Justice Department spokesperson noted a focus on “abuse of taxpayer dollars,” but declined further comment.
Trump himself distanced himself, telling NBC News he knew little about the subpoenas but reiterated criticism of Powell’s performance at the Fed and on building projects.
The episode has sparked backlash, including from Republican Senator Thom Tillis, who vowed to block any Trump Fed nominees until the matter resolves, citing concerns over DOJ independence. Analysts warn this threatens the foundational independence of the U.S. central bank, potentially causing market instability.
Market and Broader Implications
Financial markets reacted negatively, with U.S. equity index futures dropping about 0.5%, the dollar weakening, and Treasury yields largely unchanged.
Experts like market strategists view it as an attempt to “kick the legs out from under the Fed,” risking unintended economic consequences contrary to Trump’s goals.
Historians of the Fed call it a “low point” in American central banking, underscoring risks to long-term price stability when politics overrides evidence-based policy.