Interest rates, quarrels, justice Trump versus the Fed - now the power struggle is becoming highly dangerous

Is Donald Trump triggering the next constitutional crisis in the USA? The Trump government is now openly attacking the Federal Reserve. But its head Jerome Powell is fighting back. How long can he hold out?

Actually, or so it seems from the outside, Jerome Powell is not easily rattled. Even the attacks, insults and threats from Donald Trump, which have been going on for months, usually go unchallenged by the head of the US Federal Reserve (Fed).

Trump vs. PowellUS Department of Justice threatens to indict Federal Reserve Chairman

It is therefore quite unusual that Powell has now chosen strong words to vehemently defend himself against an "attempt at intimidation" by the Trump administration. The US Department of Justice served the Fed with subpoenas at the end of last week and threatened criminal investigations. These are primarily aimed at the unbending Powell, who has been objectively critical of Trump's repeated influence on the Fed's monetary policy.

While Donald Trump has always chosen pithy words to discredit Jerome Powell, the Fed Chairman is now also losing his restraint. In any case, the quiet tones are over: these are the most important questions and answers to a long-simmering dispute that could bring the USA a veritable constitutional crisis.

The US Department of Justice served the Fed with subpoenas on Friday and threatened to bring charges. Jerome Powell is alleged to have made false statements to the Senate in connection with the multi-year renovation of the central bank's buildings in Washington.

The move intensifies the long-standing feud between Donald Trump and Powell, whom the president has repeatedly attacked for opposing his calls for a significant cut in interest rates.

"The threat of impeachment is a consequence of the Federal Reserve setting interest rates in good faith in the public interest and not following the President's preferences," Powell countered in a video statement( available to read as a PDFhere ). He would continue to carry out his duties "with integrity and in the service of the American people".

In an interview with US broadcaster NBC News, the US President denied having any knowledge of the case. "I don't know anything about it, but he's certainly not doing a very good job at the Fed, and he's not particularly good at building buildings," he said of Powell.

In 2017, Donald Trump nominated Jerome Powell himself as head of the Federal Reserve during his first term of office. Since taking office again in January, however, he has showered him with invective. He called Powell a "moron", "imbecile" and "loser".

They used to be friendsFed Chairman Jerome Powell defends himself so stubbornly against Trump

And: Trump repeatedly threatened the Fed Chairman with dismissal and an indictment for "incompetence". The reason for this is the multi-year renovation of two central bank buildings in Washington D.C.: the costs for this have risen from the original 1.9 billion US dollars to 2.5 billion US dollars - partly because the buildings were more contaminated with asbestos than expected and materials and labor have become more expensive.

In reality, however, it is about something completely different.

Low interest rates. Low interest rates. Low interest rates.

Trump wants to use cheap money to make real estate loans cheaper, among other things. However, as the Federal Reserve is an independent institution, he cannot force it to lower the key interest rate.

The Fed's core objectives are stable prices and full employment in the labor market. If the key interest rate is too high, it slows down the economy, for example because borrowing costs are too high. A lower interest rate stimulates growth and the labor market, but can fuel inflation.

The Fed wants to continue to make its financial policy decisions in the interests of the American people - independently and based on facts, analyses and economic conditions.

Donald Trump's regular insults of Powell have worn thin over the months as he has gotten used to them. And they have sometimes been drowned out by the flood of regular insults from other unpopular politicians and high-ranking officials.

However, a legendary joint construction helmet appearance by Donald Trump and Jerome Powell remains in the memory. US President Donald complained on camera about the high costs of renovating Fed buildings - and pulled out a document to confirm this.

Powell shook his head, pulled out his reading glasses and subjected the document to a fact check in front of Donald Trump and the cameras, in which Trump did not come off well.

In August 2025, US President Donald Trump wanted to sack Fed Governor Lisa Cook. Officially, he justified the move with possible misrepresentations in mortgage contracts.

Cook then took legal action through her lawyers. Cook argued that Trump had no right to dismiss her. She rejected the accusations. The dismissal was overturned by a federal judge. On appeal, the Supreme Court ruled that Cook could remain in office until he had heard the case.

The US President may only dismiss a member of the Fed Board, including the Chairman, "for cause" - which usually means misconduct in office or a breach of duty. In this way, US legislators wanted to prevent the central bank from becoming a pawn of political interests.

A federal judge expressly confirmed this in the case of Lisa Cook. This means that someone cannot be dismissed solely on the basis of conduct prior to taking office.

Before Donald Trump, no president had questioned the independence of the Fed. However, the White House now believes "that criminal prosecution can be used as a political tool against those who disrupt Trump or stand in his way", as the US portal "MS Now" (formerly MSNBC) writes.

The subpoena of Jerome Powell is to be seen as a blatant attack on the independence of the Federal Reserve, say political observers. They are a further attempt by Trump to expand his power at the expense of the democratic separation of powers. And: "The obvious corruption of the judicial system is exacerbated by the fact that the White House is making no significant effort to conceal this corruption."

The investigation into Powell is "a low point in Trump's presidency and a low point in the history of central banking in America ", Peter Conti-Brown, Fed historian at the University of Pennsylvania, told Reuters.

"Congress did not create the Fed to reflect the president's daily mood swings," Conti-Brown continues. Trump apparently sees it differently and "because the Fed is resisting President Trump's efforts to disempower it, he is now using the full force of American criminal law against its chairman."

"We are stunned by this deeply disturbing development, which has come out of the blue after tensions between Trump and the Fed appeared to have been tamed recently," Krishna Guha, analyst at investment bank Evercore ISI, is quoted as saying by EuroNews. He expects "the dollar, bonds and stocks to all fall - in a sell America trade similar to last April at the height of the tariff shock and the earlier threat to Powell's position as Fed chairman."

In an initial reaction on the financial markets, the price of gold rose to a new record high. Doubts about the independence of the US Federal Reserve could lead to "more inflation and higher long-term interest rates", commented the Frankfurter Rundschau. This is exactly "what will happen if investors lose confidence in the US Federal Reserve."