Federal Reserve Chair Jerome Powell disclosed Sunday evening that the Department of Justice has served the central bank with grand jury subpoenas threatening criminal indictment over his congressional testimony about the Fed’s headquarters renovation.

In a video statement released January 11, Powell acknowledged the investigation while rejecting the stated premise, declaring that the probe is political retaliation for the Federal Reserve’s refusal to lower interest rates according to presidential preferences rather than economic data.

“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.

The subpoenas relate to Powell’s June 2025 testimony before the Senate Banking Committee regarding a multi-year renovation project of historic Federal Reserve office buildings that has ballooned to approximately $2.5 billion, over its original $1.9 billion budget. During that testimony, Powell defended the project against allegations of extravagance, telling lawmakers there were no special elevators, new water features, rooftop gardens, or VIP dining areas, countering claims made by Office of Management and Budget Chair Russell Vought.

Sources confirm the cost increases resulted from legitimate factors including: asbestos removal, lead contamination in soil, higher-than-expected water table issues, pandemic-era inflation, design changes requested by the U.S. Commission of Fine Arts, and unexpected complications. The buildings had not undergone comprehensive renovation since their construction nearly a century ago.

Speaking at the 2026 Goldman Sachs Global Strategy Conference in London on Monday, the bank’s chief economist Jan Hatzius acknowledged that the criminal probe threat heightens concerns about Federal Reserve independence while expressing confidence that Powell will continue making data-driven decisions.

“I have no doubt that he (Powell) in his remaining term as chair is going to make decisions based on the economic data and not be influenced one way or the other, cutting more or refusing to cut on the back of data that could push in that direction,” Hatzius said.

The Federal Reserve’s independence from political influence has been a cornerstone of U.S. monetary policy since the Treasury-Federal Reserve Accord of 1951, which freed the central bank from the requirement to support government bond prices and allowed it to set monetary policy without concern for the long-term borrowing costs of the federal government.​

Central bank independence exists to prevent monetary policy from becoming subject to short-term political pressures that could provide temporary economic boosts at the expense of long-term stability. Research consistently demonstrates that economies with independent central banks experience lower and less volatile inflation rates compared to those where monetary policy is subject to political control.

Independent central bankers can make unpopular but necessary decisions, such as raising interest rates to combat inflation.

In a joint statement posted Monday, former Federal Reserve Chairs Alan Greenspan, Ben Bernanke, and Janet Yellen, along with former Treasury Secretaries Henry Paulson, Timothy Geithner, Robert Rubin, and Jacob Lew, condemned the investigation.

“The Federal Reserve’s independence and the public’s perception of that independence are critical for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates. The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence. This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly. It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success,” the statement said.

Senator Thom Tillis (R-NC), a Banking Committee member, announced Sunday he would oppose any Fed nominees “until this legal matter is fully resolved.” In a statement on X, Tillis said: “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none. It is now the independence and credibility of the Department of Justice that are in question.    I will oppose the confirmation of any nominee for the Fed—including the upcoming Fed Chair vacancy—until this legal matter is fully resolved.”

Senator Lisa Murkowski (R-Alaska) quickly backed Tillis’s position.

“After speaking with Chair Powell this morning, it’s clear the administration’s investigation is nothing more than an attempt at coercion,” Murkowski said in a statement. “If the Department of Justice believes an investigation into Chair Powell is warranted based on project cost overruns—which are not unusual—then Congress needs to investigate the Department of Justice.” 

“The stakes are too high to look the other way: if the Federal Reserve loses its independence, the stability of our markets and the broader economy will suffer,” she continued. “My colleague, Senator Tillis, is right in blocking any Federal Reserve nominees until this is resolved.”

Powell’s term as Fed Chair expires in May 2026, though his term as a Federal Reserve Governor extends until January 2028. Trump has indicated he will not reappoint Powell and plans to announce a successor nominee.