President Donald Trump has taken his ongoing feud with Federal Reserve Chair Jerome Powell to a new level, threatening legal action and raising fresh questions about the independence of America's central bank.
The Lawsuit Threat
Speaking at a Monday news conference at Mar-a-Lago alongside Israeli Prime Minister Benjamin Netanyahu, Trump accused Powell of "gross incompetence" and announced plans for a "major lawsuit" against the Fed Chair, whose term expires in May 2026.
"We're going to probably bring a lawsuit against him," Trump said, though he didn't specify what legal grounds such a suit would rely on or when it might be filed, according to The Washington Post.
The focus of Trump's anger? The Federal Reserve's headquarters renovation project, which has become his favorite talking point over the past year. The project's costs have swelled to more than $3.1 billion, up from a pre-pandemic estimate of $1.9 billion. The Fed attributes the increase to higher post-pandemic prices for materials like steel and cement.
Powell has pushed back on Trump's characterization of the cost overruns, pointing out that the President had incorrectly lumped in costs from another government building constructed five years earlier.
When reporters asked whether Trump would actually fire Powell with just five months remaining in his term, the President kept the door open: "Maybe I still might," he said, according to CNBC TV18.
The Real Issue: Interest Rates
While Trump has fixated publicly on the renovation costs, his broader criticism of Powell over the past year has centered on interest rate policy. The President has repeatedly pressured the Fed Chair to cut rates more aggressively, despite the central bank's mandate to operate independently from political influence.
Critics warn that such overt political pressure threatens to erode the Fed's credibility in global markets, where central bank independence is viewed as essential for economic stability.
In a twist of irony, Trump himself appointed Powell during his first term. Now he's already looking ahead to his next pick. During the news conference, Trump said he will announce his nominee to lead the Federal Reserve in January.