Washington
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The gloves are off in the heated clash between Federal Reserve Chair Jerome Powell and President Donald Trump. As extraordinary as a criminal investigation of a sitting Fed chair is, Powell’s rebuke of Trump was in some ways even more shocking.
For years, Powell has remained mum even as Trump called him every name and used every insult in the book, repeatedly threatening to fire him. Powell’s playbook has been to remain neutral, saying his one and only focus was on the Fed’s politically independent mission to maintain maximum employment and low inflation. Everything else was a distraction, Powell maintained.
Trump forced Powell’s hand after the Justice Department served him with subpoenas. But in Powell’s remarkable show of defiance, he didn’t focus on his own actions but on defending the Fed against the Trump administration’s attack on its independence — and, more broadly, the US economy.
In his stunning two-minute video Sunday night, Powell characterized the Trump administration’s potential prosecution as a threat against the livelihoods of the American public to serve Trump’s whims.
“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,” Powell said. “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.”
The fact that Powell spoke out forcefully against the Trump administration this week for the first time is all the more notable because Powell has long treasured and promoted the Fed’s independence, which he sees as tantamount to its mission to help American households live better lives.
It enables the Fed to do its core mission: making jobs plentiful and keeping prices in check, even when politically imprudent.
Economists, academics and former Fed officials broadly agree that safeguarding Fed independence is necessary for the soundness of the US economy. It ensures policymakers can make tough decisions on interest rates that are rooted in economic reality and not the whims of whoever controls the White House.
For example, a president may want lower rates to grow the economy and send stocks higher, but that policy could hurt Americans by sending prices out of control.
Powell has been an ardent defender of the Fed’s ability to set interest rates free of politics throughout Trump’s relentless pressure campaign over the past year.
For example, during a press conference in July, Powell was asked about Trump’s recent attacks on him and the Fed. Powell didn’t engage – but offered a long defense of the Fed’s independence.
“I’ll just say that, so I think that having an independent central bank has been an institutional arrangement that has served the public well. And as long as it serves the public well, it should continue and be respected. If it didn’t serve the public well, then it wouldn’t be something that we should just automatically defend,” Powell said. “But what it gives us and other central banks, what it gives you is the ability to make these very challenging decisions that in ways that are focused on the data and the evolving outlook, the balance of risks and all of things we talk about, and not political factors.”
Trump noted that the Fed is hardly alone – governments of advanced economies across the world have put distance between monetary policymakers and politicians.
“If you were not to have that, that would be a great temptation, of course, to use interest rates to affect elections, for example,” Powell added. “And that’s something that we don’t want to do.”
Previously, the closest Powell had come to criticizing Trump was in November 2024, when he was asked whether he would leave his post early if Trump demanded it.
“No,” Powell said in a press conference.
Asked to elaborate, Powell said, “Not permitted under the law.”
Why the about face? Because Powell viewed the potential prosecution as an existential threat that could forever politicize the Fed, undermine its credibility and upset global markets and the economy.
“You cannot interfere with the independence of the Fed. And this is a bold attempt to do so,” former Dallas Fed President Richard Fisher told CNN. “I don’t know what the president wants to accomplish other than being vindictive.”
Fed remains independent, for now
Among the many problems with Trump’s demands for the Fed to lower rates is the perception of political interference when the Fed does take that action. The Fed in the second half of last year lowered interest rates three times in a row, though Trump has asked for more. Trump has said the United States should have rates that are among the lowest in the world and that he should have a say in rate decisions.
To avoid the perception of influence, some Fed observers believe the central bank could hold off on rate cuts for longer. In other words, ridding the Fed of its independence could backfire spectacularly on Trump by making further rate cuts less likely and even emboldening Powell to remain on the Fed’s board after his term as chair ends on May 15. He is serving a concurrent term on the board that runs through 2028.
“My thought is that I really want to turn this job over to whoever replaces me in — with the economy in really good shape. That’s what I want to do,” Powell said in December after the Fed announced its latest rate cut, in response to a question posed by CNN’s Matt Egan on what Powell hopes his legacy as chair will be.
The Trump administration also has a tough case to prove against Powell.
Investors and economists were puzzled by the latest salvo in the Trump-Powell fight, considering Powell’s term as chair ends in just four months.
The federal investigation also isn’t sitting well with a growing number of Republicans in Congress, such as Sens. Thom Tillis of North Carolina and Lisa Murkowski of Alaska, along with Rep. French Hill of Arkansas. “People that respond publicly to an investigation, outwardly and firmly, like Powell, are usually in the driver’s seat,” Evan Gotlob, a former federal prosecutor, told CNN.
Trump allies have accused Powell of mismanaging the central bank’s renovation, which became more costly in recent years, and of lying under oath when he described some of the upgrades to senators in June 2025. Peter Navarro, a senior counselor to the president, told Fox Business on Monday: “We know he made false statements.”
“The only question is whether he was aware and did it with malice,” he said.
The Fed has been forthcoming about the renovation’s cost overruns and its collaboration with other agencies, even posting an FAQ on its website with all those details. The Fed last summer also provided a guided tour of the renovation to a handful of reporters.
“Lying to Congress is a tough thing to prove,” former federal prosecutor Gotlob said. “Powell is definitely in a better position than the Justice Department.”