What happened
Federal Reserve Chair Jerome H. Powell disclosed on 11 January 2026 (US time) that the US Department of Justice had served the Federal Reserve with grand jury subpoenas the same day, threatening a criminal indictment over his June 2025 testimony to the Senate Banking Committee on the central bank’s $2.5 billion headquarters renovation. The written statement, posted on the Federal Reserve’s website and reported on Monday 12 January, escalated President Donald Trump’s open pressure campaign against the central bank. Powell called the action “unprecedented” and a “pretext,” arguing the underlying dispute is whether monetary policy will be “directed by political pressure or intimidation” or set independently on the basis of evidence and economic conditions. The disclosure follows separate litigation over Trump’s attempt to fire Fed Governor Lisa Cook, now heading to the Supreme Court.
What markets did on 12 January 2026
The Reuters/Dawn write-up records that longer-dated US Treasury yields rose as investors repriced the risk that a less-independent Fed could leave inflation less anchored. Major US equity benchmarks opened lower, with bank stocks hit by a separate Trump proposal to cap credit-card rates; gold hit a record high and the dollar weakened. Reuters noted gold crossed $4,600.00 an ounce on the New York Mercantile Exchange for the first time, and quoted Goldman Sachs chief economist Jan Hatzius saying “there are more concerns that Fed independence is going to be under the gun.”
Why it matters for Pakistan and other emerging markets
Pakistan reads this through its currency, its IMF programme, and its domestic rate cycle. A less-credible US Fed tends to lift the dollar index and Treasury yields, raise import bills for oil importers, and force emerging-market central banks to either tighten policy or absorb currency pressure. Earlier in January 2026, the State Bank of Pakistan (SBP) disclosed that reserves had risen to $16 billion, their highest since FY21 (see SBP forex article); a sustained dollar or US-yields move higher would complicate that cushion.
Condemnation inside the United States was unusually broad. A joint statement from former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan, with former senior economic policy officials from both parties, said the move was “how monetary policy is made in emerging markets with weak institutions” and “has no place in the United States.” Republican Senator Thom Tillis, on the Senate Banking Committee, called it a “huge mistake” and said he would oppose Trump nominees to the Fed, including Powell’s successor, “until this legal matter is fully resolved.”
What is still uncertain
The DOJ has neither confirmed nor detailed the subpoenas; a spokesperson declined to comment on the case but said the attorney general had instructed US attorneys to “prioritise investigating any abuse of taxpayer dollars.” Powell’s term as chair expires in May, but he is not required to leave the Board of Governors until 2028, leaving open the possibility that the legal pressure will extend beyond a single rate decision. No court filing or indictment has been made public as of 12 January.
Sources & reporting notes
This is a synthesis of the Federal Reserve's own statement and Reuters/Dawn market reporting, not eyewitness reporting. Sources were reviewed on 2026-01-12.
- Board of Governors of the Federal Reserve System — "Statement from Federal Reserve Chair Jerome H. Powell," 11 January 2026Primary record · The verbatim text Powell released on the Sunday evening before the 12 January news cycle; the source of the subpoena disclosure and the strongest contemporaneous statement from the Fed chair.
- Dawn (Reuters wire) — "Trump team escalates attack on Fed's Powell with criminal indictment threat," 12 January 2026Independent reporting · Combines the Powell statement with market reaction (yields, equities, gold), the joint former-Fed-chairs statement, and Republican pushback from Senators Tillis, Cramer and Murkowski.
