U.S. prosecutors are investigating Federal Reserve Chair Jerome Powell over his testimony last summer about the central bank’s building renovation project, according to government officials with knowledge of the matter. The Fed received grand jury subpoenas from the Justice Department on Friday that threaten a criminal indictment, the Fed chair said. In an extraordinary two-minute video message, Powell accused the administration of using the threat of criminal prosecution to pressure the Fed into lowering rates. He framed the Justice Department investigation as nothing less than a head-on challenge to the Fed’s ability to operate free of political control.

The Justice Department’s investigation of Jerome Powell marks the most aggressive step yet in President Trump’s campaign to bend the traditionally independent central bank to his will. Trump has publicly berated Powell for being too slow to lower interest rates. Trump has said he was thinking of suing Powell for “gross incompetence.” The administration is also attempting to remove Fed governor Lisa Cook in a case that is before the Supreme Court.

• For Years, Powell Avoided Fighting Trump. That’s Over.
• Watch: Powell on the U.S. Investigation Targeting Him
• Trump’s Investigation of Powell Is Also a Warning to the Next Fed Chair
• Gold Breaks Through $4,600 on Fed Concerns, Haven Boost

The December employment report gives Federal Reserve officials enough cover to stay on the sidelines at their meeting this month, with the unemployment rate falling to 4.4% from a downwardly revised 4.5% in November. Total payroll growth was just 50,000, and the three-month average for private-sector hiring fell to 29,000—the second-lowest pace of the year. The tepid pace of job creation underscores the "slow to hire, slow to fire" dynamic that has defined the labor market in 2025.

• Job Gains Cooled in December, Capping Year of Weak Hiring
• Slowest Labor Market in Years Leaves Job Seekers Stuck

• Wall Street Is Making Bullish Bets on the Economy

President Trump is taking aim at solving the housing affordability crisis, a problem so entrenched in the economy that it has put home buying in a deep freeze for three years. Trump’s focus is on increasing home-buyer purchasing power. Industry analysts and economists say the administration will also have to find ways to meaningfully increase the supply of homes, at a time when the U.S. faces a shortage of millions of units nationwide.

10 a.m.: Employment Trends Index
6 p.m.: G7 finance ministers reportedly meet in Washington to discuss rare earth metals
6 p.m.: Peter McColough Series on International Economics event with Federal Reserve Bank of New York President John Williams

6 a.m.: NFIB Index of Small Business Optimism
8:30 a.m.: CPI
10 a.m.: RCM/TIPP Economic Optimism Index
4 p.m.: Federal Reserve Bank of Richmond President Thomas Barkin speaks at CFA Society Washington, DC event

Resilient U.S. labor markets may keep consumer prices hot, turning the Fed more hawkish than currently priced, Vontobel's Danny Zaid says. "We need to consider the inflationary impact that could come [from] a labor market that essentially, you know, doesn't crack," he says. Job creation has been cooling, but unemployment remains low and wage growth hasn't slowed significantly. Zaid says fixed-income investors should keep looking for high-quality bonds to capture yield, but he is less enthusiastic about longer-term bonds. "We still expect that there will be volatility in the long end of the curve over the next few months." — Paulo Trevisani

• Cities like Phoenix overbuilt upscale housing when remote workers started showing up during the pandemic. Now that extra inventory means perks for renters.
• Canadians resumed job hunting last month only to learn that finding work remains tough, sending the unemployment rate up sharply in the final month of 2025. Employers in the country added a net 8,200 jobs in December, Statistics Canada said Friday.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.