Introduction to the Conflict
Federal Reserve Chair Jerome Powell revealed that the Justice Department served the central bank with grand jury subpoenas, which could lead to a criminal indictment related to his testimony before the US Senate. Powell believes this action is not primarily about his testimony, but rather about a disagreement over interest rates.
The Reason Behind the Subpoenas
Powell stated that the Federal Reserve sets interest rates based on its assessment of what will serve the public, rather than following the President’s preferences. He emphasized that this is about whether the Fed can continue to set interest rates based on evidence and economic conditions, or if monetary policy will be directed by political pressure or intimidation.
Powell’s Record and Defense
Powell defended his record, noting that he has served at the Fed under both Democrats and Republicans and has always based his decisions solely on the central bank’s dual goals of maximum employment and stable prices. He has always maintained that his decisions are made with the best interest of the American people in mind.
Escalation of the Struggle
The Justice Department’s subpoenas mark a significant escalation in the year-long struggle between the administration and the Fed. This escalation has led to concerns about the independence of the Federal Reserve and its ability to make decisions without political pressure.
Trading Barbs Over Rates and Renovations
The conflict between Powell and President Trump began when Trump criticized Powell for not cutting interest rates as much and as quickly as the President had demanded. Additionally, Trump blasted Powell over the Fed’s renovation of its headquarters, claiming he demonstrated "gross incompetence" in overseeing the project.
The Renovation Dispute
In July, Trump visited the Fed’s headquarters and toured the construction site alongside Powell, as the two publicly disagreed over the cost of the project’s overruns. Trump claimed the price tag had increased to $3.1 billion, an amount Powell disputed.
Trump’s Response
When asked about the Justice Department probe, Trump told NBC News that he knew nothing about it. He also denied Powell’s assertion that the subpoenas were a means of pressuring the Fed to lower rates. Trump stated that what should pressure Powell is the fact that rates are far too high.
The Impact of the Conflict
The Fed held benchmark rates steady through most of 2025, then voted for quarter-point cuts in September, October, and December, bringing rates down to a range of 3.5%-3.75%. The conflict between the administration and the Fed has significant implications for the economy and the independence of the Federal Reserve.
Conclusion
In conclusion, the conflict between the administration and the Fed has escalated, with the Justice Department serving the central bank with grand jury subpoenas. Powell has defended his record and emphasized the importance of the Fed’s independence. The outcome of this conflict will have significant implications for the economy and the role of the Federal Reserve in setting monetary policy. As Powell stated, "Public service sometimes requires standing firm in the face of threats," and he will continue to do the job he was confirmed to do, with integrity and a commitment to serving the American people.
