Federal Reserve Chair Jerome Powell has stated that the criminal investigation initiated by federal prosecutors is politically motivated. He claimed the investigation stems from the central bank's refusal to align its policy rate with the president's wishes.

At the end of the term in May 2026, and his relationship with President Donald Trump has intensified.

Federal Reserve chief links criminal investigation to policy deadlock

In a recent video, Federal Reserve Chair Powell said that the U.S. Department of Justice issued subpoenas to the Fed on Friday. According to Powell, this involved a threat of criminal charges related to his testimony before Congress last year about a $2.5 billion renovation of the central bank's headquarters in Washington DC.

However, Powell described this move as "unprecedented." He added that it should be examined as part of a broader pattern of pressure and threats against the administration.

Powell emphasized that the Federal Reserve has consistently kept Congress informed through statements and public announcements regarding the renovation. The chairman stressed that allegations surrounding the project are being used merely as a pretext. Powell linked the Department of Justice's investigation to ongoing disputes over monetary policy.

"The threat of criminal charges stems from the fact that the Federal Reserve sets interest rates based on its best judgment for the public good, not according to the president's wishes," he said. "This is about whether the Fed can continue to set rates based on evidence and economic conditions—or whether monetary policy will be driven in the future by political pressure or threats."

The Federal Reserve lowered its benchmark interest rate three times in the second half of 2025. The most recent cut was made in December, when the rate was set at 3.50–3.75 percent. The central bank also ended quantitative tightening on December 1, 2025.

Trump denies knowledge of DOJ's investigation into the Federal Reserve

It is noteworthy that after returning to the White House in January 2025, President Trump repeatedly criticized Powell for not lowering interest rates more decisively, and he even hinted at the possibility of removing him from office.

Trump said in an NBC interview, however, that he knew nothing about the Department of Justice's investigation into the Federal Reserve.

"I don't know anything about it, but he's definitely not very good at the Fed, nor very good at building structures," Trump said on Sunday.

He also stated that the Department of Justice's challenges have nothing to do with benchmark interest rate policy.

"No. I wouldn't even have considered doing that. The pressure he should face is that interest rates are far too high. That's the only pressure he has," Trump added.

As Powell's term nears its end in May 2026, President Donald Trump is approaching the appointment of a new Federal Reserve chair. According to Fox News, Trump's final list has been narrowed down to four candidates: Kevin Hassett, Kevin Warsh, Christopher Waller, and Rick Rieder.

According to the report, Trump has one interview left before making the final decision. In December, he said the next Fed chair would be someone who 'believes strongly in lower interest rates'.

Kevin Hassett, a long-time conservative economist and key advisor to Trump, is widely considered the strongest candidate to succeed Powell.