The Justice Department has subpoenaed the Federal Reserve for information on the central bank's headquarters renovation, according to a video statement released by Fed chairman Jerome Powell on Sunday.
It's the latest escalation in the administration's pressure campaign to force the central bank to make bigger cuts in interest rates.
Powell said the grand jury subpoenas, received by the Fed on Friday, threaten criminal indictments related to his testimony on the renovation project before the Senate Banking Committee last June.
In an unusually combative statement, however, Powell called it a mere pretext.
"This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings," Powell said. "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."
The Fed has cut interest rates at each of its last three meetings. But President Trump has been outspoken in saying he wants much lower rates.
Trump has threatened to fire Powell, whose term as chairman expires in May. He's also tried to remove another Fed board member, Lisa Cook, over unsubstantiated allegations of mortgage fraud.
The Supreme Court has ruled that Cook can remain on the Fed's governing board, for now. It's set to hear arguments in the case later this month.
Powell was grilled about the cost overruns during a Senate hearing last summer. The cost of renovating the Federal Reserve's headquarters has jumped, from $1.9 billion to $2.5 billion.
Powell acknowledged in his statement Sunday that scrutiny of the Fed's construction project is legitimate. But he suggested an ulterior motive in the Justice Department's probe.
"No one—certainly not the chair of the Federal Reserve—is above the law," Powell said. "But this unprecedented action should be seen in the broader context of the administration's threats and ongoing pressure."
By design, the Fed is supposed to be insulated from political pressure, so policymakers can make sometimes unpopular decisions, such as raising interest rates to keep inflation in check. Trump, who wants much lower interest rates to goose the economy, has insisted he should have greater say in monetary policy.
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