The Trump administration has launched a criminal investigation into the Federal Reserve, escalating a year-long pressure campaign to convince the central bank to lower interest rates more quickly. Federal Reserve Board Chairman Jerome Powell announced in a rare video statement Sunday night that federal prosecutors served the institution with grand jury subpoenas on Friday, regarding a $2.5 billion building renovation project and his associated testimony before the Senate Banking Committee.

However, Powell maintained, “This new threat is not about my testimony last June or about the renovation of Federal Reserve buildings. … Those are pretexts.” Rather, “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 spat has been ongoing,” explained Joel Griffith, senior fellow at Advancing American Freedom on “Washington Watch.” “Since stepping into the Oval Office in his second term, the president has repeatedly cajoled the Fed chair, along with other board members, trying to get them to lower rates. … The president has made it clear he wants interest rates far lower, and the Federal Reserve Board has not fully obliged those wishes.”

As a result, he is convinced that the “bogus” federal probe “really makes the world think that we are turning a bit into a banana republic. … From what I can tell, it has no legal foundation.”

Powell’s term is set to expire this spring, so a federal investigation will have little impact on him personally. It could, however, have a chilling effect on the conduct of future central bank chairmen. For Griffith, the issue comes down to whether America’s central bank will be controlled by politicians pursuing short-term interests or an independent committee responsible for long-term financial stability.

“We could have Congress get involved and give the Fed more guidelines on how to operate,” he allowed. “But, right now, what we have [is] a fiat system. The best-case scenario is that we keep the control of that fiat money supply out of the hands of senators, congresspeople, and either president from any party.”

“The only thing worse than a fiat currency that is not backed by something like gold or silver is a fiat currency in which the politicians can determine how much to print,” Griffith argued. “We already have an inflation problem. We saw just a few years ago, after we saw Congress increase spending during COVID and following COVID … you end up with high inflation.”

“And this wasn’t just President Biden’s fault or President Trump’s fault,” he added. “It was both presidents and both parties that pushed for this spending.”

“I’d love to see us go back to the gold standard,” reflected FRC President Tony Perkins, but that’s “not going to happen. So, we only have two choices. You have an independent Federal Reserve that regulates the monetary system, the interest rates, or, as you just described, you let the politicians control it.”

“That is correct,” Griffith concurred. “We want the Fed making these decisions without political pressure. That would be encouraging them to make short-term political gains that would cost all of us dearly in the long run.”

Chairman Powell made the same point. “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.”

“What we don’t want is the Fed to lose all independence and to rely on President Trump or any other president or any other politician to begin dictating short-term interest rates,” Griffith urged. “We know what happens. We can look at what’s happening right now in Turkey with their central bank and, of course, even far worse examples in places like Venezuela and Zimbabwe, where the politicians have complete control over the money supply: you end up with very high inflation risks and uncertainty.”

Soon after the news broke, President Trump distanced himself from the federal probe after Treasury Secretary Scott Bessent complained the investigation would spook financial markets. Top White House officials claimed that U.S. Attorney for D.C. Jeanine Pirro launched the probe without notifying the Treasury Department.

When Trump was asked whether the investigation was related to his pressure campaign for the Federal Reserve to lower interest rates, he replied, “No. I wouldn’t even think of doing it that way. What should pressure him is the fact that rates are far too high. That’s the only pressure he’s got.”

The Federal Open Market Committee lowered the federal funds interest rate at each of its last three meetings in 2025, down to a target range between 3.5% and 3.75%, slightly below historic averages. On Tuesday, the Bureau of Labor Statistics announced that the Consumer Price Index (CPI), a key inflation measure, held steady in December at an annual 2.7% in December, still well above the Federal Reserve’s 2% target rate.