The Department of Justice has opened a criminal investigation into Federal Reserve Chair Jerome Powell, the central bank confirmed Sunday, in a development that represents an unprecedented escalation in President Donald Trump's battle with the independent agency over interest rates.

Powell said in a video statement that the DOJ served the Federal Reserve with grand jury subpoenas on Friday, threatening a criminal indictment related to his testimony before the Senate Banking Committee last June. The testimony concerned the Fed's $2.5 billion renovation of its headquarters buildings in Washington, D.C.

"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," Powell said. "But this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure."

Trump told NBC News Sunday that he had no knowledge of the investigation. "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," the president 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 accuses administration of using probe as 'pretext'

Powell departed from his typically restrained approach to Trump's criticisms, issuing a video statement in which he bluntly characterized the threat of criminal charges as "pretexts" to undermine the Fed's independence in setting interest rates.

"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," Powell said. "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."

"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 added.

Powell said since taking office in 2018, he has always "carried out my duties without political fear or favor" and is dedicated to "standing firm in the face of threats."

"I will continue to do the job the Senate confirmed me to do, with integrity and a commitment to serving the American people," Powell said.

Renovation project at center of dispute

The inquiry will focus on the accuracy of Powell's congressional testimony when he characterized the size and price of the renovation, officials told the New York Times.

The Fed's two main office buildings, located in the Foggy Bottom neighborhood of Washington, D.C., began the $2.5 billion renovation in 2022. The project is the first full-scale update to the central bank's Marriner S. Eccles and William McChesney Martin buildings, erected in the 1930s.

The renovation includes the removal of asbestos and lead, the replacement of electrical, plumbing, heating, ventilation, air conditioning and fire detection systems, and work to bring the buildings' accessibility, security and safety standards up to modern code, according to the Fed's website. The project is expected to be completed in fall 2027.

Republicans have accused Powell of lying to the Senate committee about luxury features in the renovations, including private VIP dining rooms and an outdoor terrace. White House officials claimed the project would rival the Palace of Versailles in inflation-adjusted construction costs.

In his June 2025 testimony to the Senate Banking Committee, Powell sought to shut down rumors about the renovation plans.

"There's no new marble. There are no special elevators. They're old elevators that have been there. There are no new water features. There are no beehives, and there's no roof garden terraces," he said.

Trump visited the building site in July alongside Powell and Senate Banking Committee Chair Tim Scott, overstating the cost of the renovation. Later that day, Trump downplayed concerns with the project. "Look, there's always Monday morning quarterbacks. I don't want to be that. I want to help them get it finished," he said at the time.

The central bank covers all of its own expenses through its own revenue — not congressional appropriations. That revenue is drawn from interest earned on government securities and fees charged to financial institutions.

Markets react as lawmakers weigh in

U.S. equity index futures fell about 0.5% ahead of Monday's opening bell, and the dollar weakened. The benchmark S&P 500 index of large American companies fell by around 0.5% after futures trading opened on Sunday. Gold rallied by over 1% and silver by nearly 4%.

"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.

"We are stunned by this deeply disturbing development which came out of the blue after a period in which tensions between Trump and the Fed seemed to be contained," wrote Krishna Guha, an analyst at Evercore ISI.

Peter Conti-Brown, a Fed historian at the University of Pennsylvania, called the inquiry "a low point in Trump's presidency and a low point in the history of central banking in America."

"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," Conti-Brown said.

Republican Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee, said he would oppose the confirmation of any nominee for the Fed, including the upcoming Fed Chair vacancy, "until this legal matter is fully resolved."

"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," Tillis said. "It is now the independence and credibility of the Department of Justice that are in question."

Senator Elizabeth Warren of Massachusetts, the ranking member on the Banking Committee, accused Trump of orchestrating a "corrupt takeover" of the central bank.

"He is abusing the law like a wannabe dictator so the Fed serves him and his billionaire friends," Warren said. "The Senate must not move ANY Trump Fed nominee."

Powell's term ends in May amid broader Fed pressure campaign

Powell's term as chair ends in May, and Trump administration officials have signaled that he could name a potential replacement this month. Trump has said that "anybody that disagrees with me will never be the Fed Chairman."

Kevin Hassett, the head of Trump's National Economic Council and a proponent of bigger interest rate cuts, has been widely tipped for the role, which requires confirmation by the U.S. Senate.

Trump has repeatedly demanded the Fed cut rates sharply since resuming office in January. Prior to the Fed's trio of rate cuts last year, Trump berated Powell numerous times, calling him a "numbskull," "a dumb guy" and "an obvious Trump Hater." The current federal funds rate range stands between 3.50 and 3.75%.

The action comes about two weeks before Trump's effort to fire another Fed official, Governor Lisa Cook, will be argued before the Supreme Court on January 21. Cook has denied allegations of mortgage fraud and has sued to keep her job, with courts ruling she can remain in her seat while the case plays out.

David Wilcox, a senior fellow at the Peterson Institute for International Economics and the director of U.S. economic research at Bloomberg Economics, told Al Jazeera that the Fed's architects "meant to allow the Fed to set monetary policy one step removed from political control, and, so far, their safeguards have stood up under pressure."

"In response, the president has resorted to increasingly outlandish tactics. This one is the most extreme example yet," Wilcox said.