In an unprecedented escalation of political pressure on the United States' central bank, Federal Reserve Chair Jerome Powell revealed that the institution has been served with grand jury subpoenas from the Department of Justice, threatening a criminal indictment.
An Unprecedented Legal Challenge
Powell announced the dramatic development in a forceful written and video statement released on the evening of Sunday, January 11, 2026. He stated that the subpoenas were served to the Fed on Friday, January 9. According to Powell, the Justice Department's action is related to his June 2025 congressional testimony concerning ongoing renovations at the Federal Reserve's headquarters in Washington, D.C.
However, the Fed Chair framed the move as part of a broader campaign of intimidation. "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 asserted.
Broader Context of Political Feud
This legal maneuver marks a significant new chapter in President Donald Trump's longstanding feud with the central bank and its chair. The president has repeatedly and publicly called for more aggressive interest rate cuts, arguing that lower rates would boost housing affordability and reduce the government's borrowing costs.
The conflict has included extraordinary steps beyond public criticism. President Trump has long mused about firing Powell and has actively sought to remove Fed Governor Lisa Cook. The Supreme Court is scheduled to hear the case regarding Cook's position later in January 2026.
In an interview with NBC News on Sunday, President Trump denied any prior knowledge of the Justice Department's investigation into the Fed.
Market Reaction and Policy Stance
The news sent immediate shockwaves through financial markets. U.S. stock futures fell, with futures on the S&P 500 Index dropping as much as 0.7 per cent. The U.S. dollar weakened, while gold prices extended gains to reach a record high.
Despite the pressure, Powell emphasized the Fed's commitment to its independent mandate. "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," he stated.
The Fed's policy-making committee last cut its benchmark interest rate in December 2025, lowering it to a target range of 3.5 per cent to 3.75 per cent. This was the third consecutive quarter-point reduction. Officials have signaled a pause, indicating they need more data on inflation and employment before considering further moves. Their next meeting is scheduled for January 27-28, 2026, and market expectations for a rate change at that gathering are minimal.
Powell, who was first appointed chair by President Trump in 2018, vowed to continue his work "with integrity and a commitment to serving the American people." His current term as chair expires in May 2026, though his term as a Fed governor lasts until 2028. He has not indicated whether he plans to step down in May. President Trump has stated he has already chosen his nominee to replace Powell, with Kevin Hassett, the director of the National Economic Council, considered a front-runner, though no official name has been announced.
