The Trump administration in the US has escalated its pressure campaign against Federal Reserve Chair Jerome Powell, alleging he either misled Congress or mismanaged the central bank’s $2.5 billion headquarters renovation—an accusation that could provide a legal opening for his removal amid rising tensions over interest rate policy, the Wall Street Journal reported.
Building costs trigger fresh scrutiny
The administration’s criticism centers on ballooning expenses for the renovation of three Fed office buildings overlooking the National Mall in Washington. A letter sent Thursday by Trump’s budget director Russell Vought suggested Powell either made false statements to lawmakers or failed to comply with key capital-area building regulations.
The letter was followed by a Friday briefing, where Vought and newly appointed White House advisers on the National Capital Planning Commission said Powell’s testimony regarding cost overruns and luxury features in the redesign would face “very, very tough questions.” One of those advisers, Deputy Chief of Staff James Blair, told reporters he was “keen to pry into” compliance issues related to the Fed’s construction filings.
Legal strategy to unseat Powell?
The allegations come as Trump continues to pressure Powell to lower interest rates ahead of the 2026 election, in part to reduce the government’s borrowing costs. However, under current law, Fed officials cannot be removed over policy disputes—only “for cause,” which typically means misconduct or negligence.
By questioning Powell’s statements to Congress and the Fed’s project management, the administration appears to be building a case for such a dismissal. Blair, when asked whether findings could lead to Powell’s removal, said only that “the American people” would be concerned if Powell had lied. Vought declined to address whether the administration would pursue dismissal proceedings.
Fed pushes back
In response, the Fed posted a detailed defense on its website Friday evening, explaining that cost increases stemmed from unforeseen construction issues, including asbestos, contaminated soil, and a high water table. The Fed maintained that Powell had been truthful in his congressional testimony and that design changes did not trigger a requirement to refile plans.
Fed scholars have called the administration’s campaign an overt political tactic. “This is a high-stakes moment in the history of the Federal Reserve,” said Peter Conti-Brown of the University of Pennsylvania. “It’s a dangerous step toward manufacturing a legal justification for Powell’s removal.”
Echoes of Nixon-era tactics
The situation recalls the Nixon administration’s efforts in 1972 to undermine then-Fed Chair Arthur Burns by leaking misleading stories to the press. The aim then, as now, was to push the Fed toward easier money policies ahead of an election.
Some Trump economic advisers, including Treasury Secretary Scott Bessent, have publicly defended Powell and the Fed’s independence. But others have explored legal routes for his removal since before the election, seeing Fed resistance to rate cuts as a political obstacle.
Fed's renovation mirrors other D.C. overruns
The Fed’s building project—approved in 2017—includes the retrofit of two historic buildings and was prompted by aging infrastructure and modern security needs. Its scale and cost mirror other D.C. federal construction projects, such as the Capitol Visitor Center, which ballooned from $71 million to over $600 million.
Powell himself acknowledged the political awkwardness of such projects, saying, “No one in office wants to do a major renovation of a historic building during their term.” But he emphasized the work was necessary and board-approved.
Rate policy remains unchanged—for now
Despite the pressure campaign, the Fed is unlikely to cut rates at its next meeting. However, Powell has left the door open to a rate reduction later this year, should inflation remain subdued or the labor market weaken.
Still, Trump’s broader goal—lower borrowing costs to offset debt from his tax cuts—clashes with central bank orthodoxy, which prioritizes inflation control over fiscal accommodation. Experts warn that compromising Fed independence could damage global confidence in the U.S. dollar and financial stability.
As the political battle intensifies, markets are watching closely—not just for interest rate signals, but for signs of a deeper institutional crisis.
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