Federal Reserve Chair Jerome Powell has asked the central bank’s inspector general to conduct an additional review of an ongoing $2.5 billion renovation of the institution’s headquarters that has drawn fire from President Donald Trump and others, according to a source familiar with the matter.
Powell made the request “a few weeks ago,” the source said.
The renovation has come up as a new line of attack from Trump, who has railed against Powell for months for not lowering interest rates further. At stake is the Fed’s independence, which investors value for the role it plays in shepherding the world’s biggest economy.
At his semiannual monetary policy hearing before Congress last month, Powell was grilled by some Senate lawmakers over what they depicted as lavish upgrades to the Fed’s headquarters in Washington, DC. Powell said some of those upgrades, such as Italian beehives, are not part of the renovation. Since then, the Fed head has been under fire by top Trump officials, with some accusing him of lying under oath.
During the hearing, Sen. Tim Scott of South Carolina likened the Fed’s renovations to “luxury upgrades that feel more like they belong in the Palace of Versailles.”
Meanwhile, Trump administration officials have continued to pile on to that criticism, ramping up pressure on Powell, who has long resisted the president’s calls to lower interest rates.
“The Federal Reserve’s Inspector General is considering opening an investigation into the massive cost overruns for their $2.5B+ HQ renovation project,” wrote James Blair, a White House deputy chief of staff, on Monday on X.
Blair is one of three Trump loyalists appointed last week to the National Capital Planning Commission, the federal government’s central planning agency for the region, which has an oversight role in the Fed’s renovation project.
The Fed’s project was approved by its board in 2017, with construction beginning in 2021. It initially came with a price tag of $1.9 billion in 2019, but that has since ballooned to $2.5 billion. The Fed in an FAQ posted last week said the cost overruns were due to “unforeseen conditions” requiring more spending to rectify, such as “more asbestos than anticipated, toxic contamination in soil, and a higher-than-expected water table.”
Jaret Seiberg, a managing director at TD Cowen, said in commentary issued Monday that “Team Trump is building a case to fire Federal Reserve Chair Jerome Powell for failing to manage the renovation of the central bank’s headquarters complex.”
“We still see Powell’s firing as unlikely though the risk is growing that pressure from conservative media becomes so great the President feels compelled to act,” he wrote.
By law, the Fed chair can only be fired “for cause,” which is broadly interpreted to mean for malfeasance or a dereliction of duty. The Fed’s handling of its renovation, which administration officials are describing as mismanaged, could be used as one step in a possible pathway for Trump to sack Powell.
Powell under intense pressure
Powell has said Fed officials are waiting to see the impact of Trump’s tariffs first before lowering rates again. He has said that if it weren’t for the tariffs, the Fed would have already lowered rates this year by now.
But that strategy has prompted Trump to relentlessly criticize Powell, hurling at him insults such as “moron” and “numbskull.” Trump has adopted the moniker “Too Late” to refer to Powell, in reference to criticism that the Fed acted too late to respond to inflation’s eruption in 2021.
On Monday, Trump continued to disparage the Fed, calling for ultra-low interest rates to reduce the interest costs of the federal government’s debt.
”We should be at 1%,” Trump said at a luncheon event. “We should be less than 1%.”
Trump also told reporters on Sunday that Powell refuses to lower rates “and yet he’s spending two and a half billion dollars rebuilding the Federal Reserve building.” (Decisions about rate moves are voted on by a rotating committee of 12 Fed officials, including the chair.)
“So he got this approved, and he started the work during the Biden administration, and he doesn’t look like the kind of a guy, frankly, that wants to spend two and a half billion dollars,” he said.
Kevin Hassett, director of the White House’s National Economic Council and seen as a front-runner to be Powell’s successor, has also slammed the Fed for its renovation project, but he’s stopped short of saying the central bank should bend to Trump’s will.
“We’ll see how the Fed responds to this incredible cost overrun,” Hassett told CNBC. “I think that we’ve got a real problem of oversight and excess spending.”
“We 100% want independent monetary policy, but it sure looks like they need more congressional oversight on things like the way they build their buildings,” he added.
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