The Department of Justice has opened a criminal investigation into Federal Reserve Chair Jerome Powell, he revealed on Sunday. The case centers on his actions and statements surrounding renovations of the central bank’s buildings in Washington, D.C.

In a statement released Sunday, Powell argued that the case had little to do with the multibillion-dollar construction project and was instead a means for President Trump to target him for his refusal to comply with Trump’s vision for the economy.

“This unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure,” Powell said.

Trump has been relentlessly critical of Powell since returning to the White House, referring to him as a “stubborn moron,” a “real dummy,” a “fool,” and a “disaster” while calling for him to resign.

The president has denied having any knowledge of the investigation. “I don’t know anything about it, but he’s certainly not very good at the Fed, and he’s not very good at building buildings,” Trump told NBC News on Sunday.

The announcement sent tremors through the stock market on Monday and inspired strong rebukes from both sides of the political aisle.

Here’s a quick primer on who Powell is, what the Federal Reserve does and what’s at stake as the president allegedly tries to assert control over the country’s most important economic institution.

Who is Jerome Powell?

Powell is the chair of the Federal Reserve. He was first appointed by Trump in 2018 and reappointed by former President Joe Biden in 2022.

What is the Federal Reserve?

The Federal Reserve, often referred to simply as the Fed, is what’s known as the central bank of the United States. Its main purpose is to keep the U.S. financial system stable. It was created in the early 1900s in the wake of a series of financial panics that convinced lawmakers that a central banking authority was needed to keep the financial industry from repeatedly tanking the economy. Its decisions have an enormous impact, not just in the United States but on the entire global economy.

What does the Fed do?

The Federal Reserve has broad power to act in the interest of maintaining stability within the economy. It oversees monetary policy, regulates banks and monitors the economy for systemic risk. The most potent — and most heavily scrutinized — tool it uses is interest rates.

The Fed is perpetually working to use interest rates as a way to create balance in the economy. If rates are too low, more money can flow throughout the economy, which can cause inflation to rise. If they’re too high, that can slow down the economy, limiting growth and causing unemployment to increase.

Typically, the Fed’s interest rate changes are subtle, often a quarter of a percent up or down at a time. In extreme circumstances, though, it can make dramatic shifts to rates in order to wrench the economy away from disaster. For example, rates were brought down to essentially zero during the early stages of the COVID pandemic as the economy suddenly ground to a halt. Sky-high rates were also used to tame severe inflation that had been plaguing the country during the early 1980s.

Does the president control the Fed?

No. One of the most important things about the Federal Reserve is its independence. It is not controlled by the president or Congress. It makes its decisions entirely on its own. The Fed was specifically designed to be shielded from political pressure because lawmakers understood at the time of its creation that the country’s economic interests wouldn’t always align with the political interests of whoever is president at the time.

The president does have some influence over the Fed, though. He gets to appoint the Fed chair and members of the central bank’s Board of Governors, who each require Senate confirmation. He also has the power to fire board members or the chair, but only “for cause” like serious misconduct or inability to do the job, not over policy disagreements.

Historically, presidents have generally taken great pains not to appear as if they’re trying to influence the Fed’s decisions. “Most presidential administrations go out of their way to avoid even publicly commenting on Fed policy,” Scott Fulford, a senior economist at the Consumer Financial Protection Bureau, told Yahoo Finance.

A recent example of what can go wrong when central bank independence is undercut happened in Turkey. Autocratic leader Recep Tayyip Erdoğan effectively took control of the country’s version of the Fed, compelling it to push down interest rates. That caused inflation in Turkey to quickly go out of control. It rose as high as 72% in 2022 before the central bank was forced to crank interest rates up to 50% in order to get runaway inflation under control.

Why is Trump mad at Powell and the Fed?

Trump wants the Fed to lower rates further and more quickly than it has been willing to do. The Fed increased interest rates during the second half of Biden’s term to get post-pandemic inflation under control. It worked, but the Fed has been hesitant to cut rates too aggressively, out of concern that progress on inflation could be lost if it moves too quickly.

Trump has repeatedly criticized Powell for, in his view, waiting too long to cut interest rates, which he argues is stifling growth in the economy.

Why won’t the Fed cut rates as much as Trump wants?

Trump’s own policies are a big part of the explanation. Powell has cited “inflationary pressures” (economist-speak for things that might drive prices higher) as a reason for explaining the Fed’s cautious approach to interest rates. One of those inflationary pressures is Trump’s tariffs, which have increased companies’ operating costs, resulting in higher prices for consumers.

Is Powell being investigated for defying Trump?

Officially, no. The investigation itself is reportedly focused on Powell’s role in renovations for the Fed building in Washington.

Powell referred to issues with the renovations as “pretexts” for the president to come after him over his policy decisions.

“The threat of criminal charges is the 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,” he said.

That view is shared by many lawmakers in Congress, including some Republicans. GOP Sen. Thom Tillis accused the administration of “actively pushing to end the independence of the Federal Reserve.” Rep. French Hill, a Republican who heads the House Financial Services Committee, warned that the case could “undermine this and future Administrations’ ability to make sound monetary policy decisions.”

Will Trump fire Powell?

It’s unclear at the moment whether Trump might use the investigation as “cause” for firing Powell, but it wouldn’t be the first time that he has tried to oust a Fed official over a criminal investigation.

In August, he attempted to fire Lisa Cook, a member of the Federal Reserve Board of Governors after accusing her of committing mortgage fraud. Cook refused to accept the firing and filed a suit challenging the decision. She is still on the board for now. Her case will be taken up by the Supreme Court later this month.

Two other indictments against his political foes, former FBI Director James Comey and New York Attorney General Letitia James, were thrown out by a judge late last year after he ruled that the prosecutor who filed the charges was not legally appointed.

Powell’s time as Fed chair is set to end soon, regardless. His four-year term comes to an end in May, though he will remain a member of the board until January 2028. Trump told the New York Times last week that he has already chosen Powell’s replacement. Whoever he picks will have to be confirmed by the Senate before taking the job.