The Fed-Trump feud: What you need to know

The investigation is centered on testimony Powell gave to Congress last summer, when he defended the Fed’s expensive efforts to renovate its headquarters in Washington. The inquiry is also the latest move in an increasingly aggressive attempt by the Trump administration to exert control over how the Fed operates and makes policy—an arena where for decades the Fed has jealously guarded its independence.

Here is what you need to know about the conflict and what it could mean for the Fed’s future.

What is the investigation about?

Powell said Sunday that the Fed received subpoenas about testimony he gave to the Senate Banking Committee in June, related to how he answered questions about the Fed’s headquarters renovation project.

The Fed’s headquarters comprise a cluster of buildings near the west end of the National Mall in Washington. The main structure dates to the 1930s, and the Fed approved plans to renovate the facilities almost a decade ago.

Costs have ballooned, with the price tag rising to as much $2.5 billion, up from an estimated $1.9 billion in 2019.

President Trump and his allies have seized on the project’s duration and expense to argue Powell has managed the central bank poorly. Powell in June defended the renovation project in response to questions from Republican members of the Senate Banking Committee, which suggested the Fed was wasting money on indulgent features such as a VIP elevator and rooftop gardens.

In his testimony, Powell said that such descriptions of the work were mischaracterized. Swampy groundwater, asbestos and soil contamination at the site have caused delays and overruns, according to the Fed.

Trump’s preoccupation with the renovation seemed to subside after Trump visited the construction site with Powell in July, where the two men bickered about the project’s cost while wearing matching hard hats. In November, however, the Justice Department launched a criminal probe about the testimony that burst into public view Sunday night. A White House spokeswoman said that Trump didn’t direct the investigation.

How has Powell responded?

In a forceful statement Sunday, Powell said that Trump’s fixation on the construction project is only a pretext for gaining leverage in a deeper conflict: Trump’s demands, going back years, that Powell more aggressively slash interest rates.

Trump nominated Powell in 2017 to lead the Fed for a four-year term starting in 2018, but it didn’t take long for Trump to regret his choice when Powell’s Fed raised interest rates the following year. Trump said the rate hikes could derail a strong business climate.

Then-President Joe Biden reappointed Powell as Fed chair to another four-year term beginning in 2022.

How has the conflict escalated?

Trump renewed his attacks on Powell after returning to office in 2025, castigating the Fed chair for not bringing rates down more aggressively.

On social media, he has called Powell “stupid" and “angry" and taunted him with the nickname “Too Late."

Powell has defended the Fed’s integrity while deflecting questions about politics. In his statement Sunday night, however, Powell linked the threat of criminal charges to the Fed’s failure to follow the president’s interest-rate preferences, his most pointed response yet to Trump’s attempts at intimidation.

Why does it matter?

Fed independence is a highly sensitive issue for financial markets, where investors rely on the Fed to make policy based on economic reality, not the president’s political preferences.

In particular, investors worry that presidents would often favor cutting rates too aggressively, prioritizing a booming economy over keeping inflation low. In the long term, such a stance could entrench elevated inflation in the economy and require blistering rate hikes to correct.

Any attempt by Trump to fire Powell would potentially face high hurdles. Federal law offers Fed governors protection from arbitrary dismissal. A Supreme Court case set for argument next week—covering Trump’s attempt to fire another Fed governor, Lisa Cook—will likely establish more of the ground rules for how aggressively the White House can manage the Fed’s top ranks.

On Monday, markets didn’t move dramatically. Some analysts attributed the relative calm to bets that legal hurdles and opposition even from fellow Republicans will prevent Trump from dramatically reshaping the Fed. Yet gold prices rallied and the dollar depreciated against foreign currencies, moves that could signal jitters about the U.S. policy landscape.

Isn’t Powell’s tenure almost over?

Powell’s term as Fed chair ends in May. Trump is in the final stages of a selection process to choose his replacement, having zeroed in on candidates such as White House economic adviser Kevin Hassett, former Fed governor Kevin Warsh, current Fed governor Christopher Waller and Rick Rieder, a longtime investment manager at BlackRock.

Even after Powell’s time as chair expires, his term as an ordinary Fed governor extends until 2028. Most Fed chairs resign after their time at the helm is done, but Powell hasn’t said whether he will stay on. Any criminal charges that emerge could give Trump more legal backing to remove Powell from the Fed entirely, which would give Trump another seat to fill on the Fed’s policy committee.

How could the investigation affect the Fed?

In his Sunday night statement, Powell pledged that the Fed will continue to work apolitically while the investigation proceeds. Yet many Fed watchers are concerned about how this episode will bear on the White House-Fed relationship in the future.

Some observers are reading the investigation as a shot across the bow, amounting to a threat to the eventual nominee that consequences will follow from any break with Trump’s preference for drastically lower rates.