By CHRISTOPHER RUGABER, AP Economics Writer

WASHINGTON (AP) — The Justice Department has threatened the Federal Reserve with a criminal indictment over the testimony of Fed Chair Jerome Powell this summer regarding its building renovations, Powell said over the weekend.

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It is a major escalation by the administration after repeated attempts by President Donald Trump to exert greater control over the independent institution.

Trump has repeatedly attacked Powell for not cutting its short-term interest rate, and even threatened to fire him. Powell’s caution has infuriated Trump, who has demanded the Fed cut borrowing costs to spur the economy and reduce the interest rates the federal government pays on its debt. That anger has not subsided even after the Fed cut interest rates in three of the final four months of 2025.

Trump has also accused Powell of mismanaging the U.S. central bank’s $2.5 billion building renovation project. In a sharp departure from his previous responses to attacks by Trump, Powell described the threat of criminal charges as simple “pretexts” to undermine the Fed’s independence when it comes to setting interest rates.

While there has been a limited response from Republican lawmakers, there have been several early breaks with the party.

“If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” said North Carolina Sen. Thom Tillis, who sits on the Banking Committee, which oversees Fed nominations.

Trump is already seeking to fire Federal Reserve Governor Lisa Cook over unproven allegations that she committed mortgage fraud. The allegation was made over the summer by Bill Pulte, a Trump appointee to the Federal Housing Administration.

Here are some reasons why the independence of the U.S. Federal Reserve is guarded so closely.

Why the Fed’s independence matters

The Fed wields extensive power over the U.S. economy. By cutting the short-term interest rate it controls — which it typically does when the economy falters — the Fed can make borrowing cheaper and encourage more spending, accelerating growth and hiring. When it raises the rate — which it does to cool the economy and combat inflation — it can weaken the economy and cause job losses.

Economists have long preferred independent central banks because they can more easily take unpopular steps to fight inflation, such as raise interest rates, which makes borrowing to buy a home, car, or appliances more expensive.

The importance of an independent Fed was cemented for most economists after the extended inflation spike of the 1970s and early 1980s. Former Fed Chair Arthur Burns has been widely blamed for allowing the painful inflation of that era to accelerate by succumbing to pressure from President Richard Nixon to keep rates low heading into the 1972 election. Nixon feared higher rates would cost him the election, which he won in a landslide.

Paul Volcker was eventually appointed chair of the Fed in 1979 by President Jimmy Carter, and he pushed the Fed’s short-term rate to the stunningly high level of nearly 20%. (It is currently 3.6%, the lowest it has been in nearly three years.) The eye-popping rates triggered a sharp recession, pushed unemployment to nearly 11%, and spurred widespread protests.

Yet Volcker didn’t flinch. By the mid-1980s, inflation had fallen back into the low single digits. Volcker’s willingness to inflict pain on the economy to throttle inflation is seen by most economists as a key example of the value of an independent Fed.

Investors are watching closely

An effort to fire Powell would almost certainly cause stock prices to fall and bond yields to spike higher, pushing up interest rates on government debt and raising borrowing costs for mortgages, auto loans, and credit card debt. The interest rate on the 10-year Treasury is a benchmark for mortgage rates.

All major U.S. markets slid Monday at the opening bell, bond yields edged higher and the value of the U.S dollar declined.

Most investors prefer an independent Fed, partly because it typically manages inflation better without being influenced by politics, but also because its decisions are more predictable. Fed officials often publicly discuss how they would alter interest rate policies if economic conditions changed.

If the Fed was more swayed by politics, it would be harder for financial markets to anticipate — or understand — its decisions.

While the Fed controls a short-term rate, financial markets determine longer-term borrowing costs for mortgages and other loans. And if investors worry that inflation will stay high, they will demand higher yields on government bonds, pushing up borrowing costs across the economy.

In Turkey, for example, President Recep Tayyip Erdogan forced the central bank to keep interest rates low in the early 2020s, even as inflation spiked to 85%. In 2023, Erdogan allowed the central bank more independence, which has helped bring down inflation, but short-term interest rates rose to 50% to fight inflation, and remain high.

The Fed’s independence doesn’t mean it’s unaccountable

Fed chairs like Powell are appointed by the president to serve four-year terms, and have to be confirmed by the Senate. The president also appoints the six other members of the Fed’s governing board, who can serve staggered terms of up to 14 years.

Those appointments can allow a president over time to significantly alter the Fed’s policies. Former president Joe Biden appointed four of the current seven members: Powell, Cook, Philip Jefferson, and Michael Barr. A fifth Biden appointee, Adriana Kugler, stepped down unexpectedly on Aug. 1, about five months before the end of her term. Trump has already nominated his top economist, Stephen Miran, as a potential replacement, though he will require Senate approval. Cook’s term ends in 2038, so forcing her out would allow Trump to appoint a loyalist sooner.

Trump will be able to replace Powell as Fed chair in May, when Powell’s term expires. Yet 12 members of the Fed’s interest-rate setting committee have a vote on whether to raise or lower interest rates, so even replacing the Chair doesn’t guarantee that Fed policy will shift the way Trump wants.

Congress, meanwhile, can set the Fed’s goals through legislation. In 1977, for example, Congress gave the Fed a “dual mandate” to keep prices stable and seek maximum employment. The Fed defines stable prices as inflation at 2%.

The 1977 law also requires the Fed chair to testify before the House and Senate twice every year about the economy and interest rate policy.

Could the president fire Powell before his term ends?

The Supreme Court last year suggested in a ruling on other independent agencies that a president can’t fire the chair of the Fed just because he doesn’t like the chair’s policy choices. But he may be able to remove him “for cause,” typically interpreted to mean some kind of wrongdoing or negligence.

It’s a likely reason the Trump administration has zeroed in on the building renovation, in hopes it could provide a “for cause” pretext. Still, Powell would likely fight any attempt to remove him, and the case could wind up at the Supreme Court.

MEXICO CITY (AP) — Mexico President Claudia Sheinbaum said she had “a very good conversation” with U.S. President Donald Trump on Monday and that their two governments will continue working together on security issues without the need for U.S. intervention against drug cartels.

The approximately 15-minute call came after Sheinbaum said Friday she had requested dialogue with the Trump administration at the end of a week in which he had said he was ready to confront drug cartels on the ground and repeated the accusation that cartels were running Mexico.

Trump has repeatedly offered to send the U.S. military after the cartels and Sheinbaum has always declined, but after the U.S. removal of Venezuelan President Nicolás Maduro, Trump’s comments about Mexico, Cuba and Greenland carried new weight.

“He (Trump) asked me my opinion about what they had done in Venezuela and I told him very clearly that our constitution is very clear, that we do not agree with interventions and that was it,” Sheinbaum said.

Trump “still insisted that if we ask for it, they could help” with military forces, which Sheinbaum said she again rejected. “We told him, so far it’s going very well, it’s not necessary, and furthermore there is Mexico’s sovereignty and territorial integrity and he understood.”

In an interview with Fox News aired last Thursday, Trump said, “We’ve knocked out 97% of the drugs coming in by water and we are going to start now hitting land, with regard to the cartels. The cartels are running Mexico. It’s very sad to watch.”

Sheinbaum said Monday the two leaders agreed to continue working together.

Mexico’s Foreign Affairs Secretary Juan Ramón de la Fuente spoke Sunday with his U.S. counterpart, Secretary of State Marco Rubio. Rubio asked for “tangible results” and more cooperation to dismantle the cartels, according to a statement from the U.S. State Department.

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Sheinbaum said Mexico shared those results, including a significant drop in homicides, falling U.S. fentanyl seizures and fentanyl overdose deaths.

Experts still see U.S. intervention in Mexico as unlikely because Mexico is doing what the U.S. asks and is a critical economic partner, but expect Trump to continue using such rhetoric to maintain pressure on Mexico to do more.

Sheinbaum said the two leaders did not speak about Cuba, which Trump threatened Sunday. Mexico is an important ally of the island nation, including selling it oil that it will need even more desperately now that the Trump administration says it will not allow any more oil shipments from Venezuela to Cuba.

By JIM VERTUNO

The trial of a Texas police officer charged in the halting law enforcement response to the attack on Robb Elementary heads into a second week Monday with prosecutors continuing to press their case that he did nothing in the early moments to stop the gunman.

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Adrian Gonzales, 52, a former Uvalde schools police officer, was among the first officers to arrive on the scene as the gunman approached the school. Gonzales has pleaded not guilty to 29 counts of child abandonment or endangerment.

The May 24, 2022, attack is one of the worst school shootings in U.S. history. It left 19 students and two teachers dead.

The opening days of the trial included dramatic replays of the initial emergency calls, testimony from teachers who huddled with terrified students, and the mother of one of the victims recounting how her daughter had asked to leave school early that day.

The trial’s second week could include testimony from experts in police training and more families of the victims. It was unclear if Gonzales planned to testify in his own defense.

Former Uvalde school district police officer Adrian Gonzales arrives in the courtroom at the Nueces County Courthouse in Corpus Christi, Texas, Tuesday, Jan. 6, 2026. (AP Photo/Eric Gay, Pool)

Trial focused on a single officer, not the larger police response

Gonzales was among the first of more than 370 federal, state and local officers to arrive at the school. It would take more than an hour for a tactical team to go into a classroom and kill 18-year-old gunman Salvador Ramos.

The trial is tightly focused on Gonzales’ actions. Prosecutors allege he abandoned his active shooter training and did not try to engage or distract the gunman outside the school. They said he failed again minutes later when a group of officers went inside the school only to retreat when they came under heavy gunfire.

Prosecutors noted how students made 911 calls from inside the classroom with the gunman.

“When a child calls 911, we have a right to expect a response,” special prosecutor Bill Turner said in opening statements.

Gonzales’ attorneys said he never saw the gunman outside the school. They also said Gonzales helped students evacuate from other classrooms and noted how the gunman was able to quickly get inside through an unlocked door.

Attorney Nico LaHood makes opening arguments during a trial for former Uvalde school district police officer Adrian Gonzales at the Nueces County Courthouse in Corpus Christi, Texas, Tuesday, Jan. 6, 2026. (AP Photo/Eric Gay, Pool)

A mother, teachers and photos recount the terror of the day

Jennifer Garcia told jurors her 9-year-old daughter Eliahna Garcia asked to leave school early after an awards program. But the family had already given her teacher a little bit of money to pitch in for a class pizza and movie party.

“She wanted to come home,” Garcia said, fighting back tears. “I told her, ‘No … stay at school.’”

The family was among the last to learn that night that their daughter had died.

Several Robb teachers and a staff member described the terror of seeing the gunman approach and hearing the booming staccato of gunfire. They described following their training for active shooter situations: locking classroom doors, turning out the lights and keeping the children quiet.

“I told them I loved them,” said teacher Lynn Deming, who was wounded by shrapnel when a classroom window was shot out. “I wanted to tell them it would be OK, but I wasn’t sure. I wanted to make sure the last thing they heard was that somebody loved them.”

Jurors also saw photos from the classrooms that showed large amounts of blood and the dead gunman. A medical examiner described the wounds to the children, noting several were shot at least a dozen times.

Tracing a trail of bullets outside the school

Prosecutors focused heavily on a trail of bullets and shell casings left as the gunman fired his rifle outside the school. They hope to show the jury that Gonzales should have been close enough to the gunman to see him shooting and confront him in the early moments.

Prosecutors had a setback when the testimony of the first teacher to testify was dismissed by the judge. She described running with children from the playground, seeing a gunman dressed in black with a rifle, and puffs of smoke in the dirt from bullets as he fired.

Defense lawyers complained her detailed description of the gunman — which would help place him near Gonzales — was new evidence that was not disclosed before trial. Judge Sid Harle denied their request for a mistrial but instructed the jury to disregard her testimony.

Rare prosecution of a police officer

The trial is a rare case in which a police officer could be convicted of allegedly failing to act to stop a crime and protect lives.

Gonzales and former Uvalde schools Police Chief Pete Arredondo are the only two responding officers that day to face charges. Arredondo’s trial has not yet been set.

Prosecutors likely will face a high bar to win a conviction. A Florida sheriff’s deputy was acquitted by a jury after being charged with failing to confront the shooter in the Parkland, Florida, school massacre in 2018 — the first such prosecution in the U.S. for an on-campus shooting.

By DAVID A. LIEB

After a frenetic few months of congressional redistricting efforts, President Donald Trump’s plan to reshape voting districts for partisan advantage ahead of this year’s midterm elections stands at an important juncture.

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Will Republican- and Democratic-led states ramp up their remapping of U.S. House districts as new legislative sessions get underway? Or will the mid-decade redistricting frenzy fade away following Indiana’s resounding rejection of Trump’s pressure-packaged campaign?

“We’re at a crossroads to see if the mid-decade redistricting movement gains more speed or was simply an attempt by Donald Trump to impact elections that in many states fizzled,” said Jeffrey Wice, director of the Elections, Census and Redistricting Institute at New York Law School.

Virginia and Florida are two key states to watch. Democrats who lead Virginia and Republicans who lead Florida could try to swing multiple seats in their party’s favor by an aggressive redistricting. Virginia’s legislative session begins Wednesday. Florida Gov. Ron DeSantis plans to call a special session in April on congressional redistricting.

What happens next in Democratic-led Illinois and Maryland and in Kansas’ Republican-led Legislature also could affect the GOP’s ability to maintain a narrow House majority in the face of political headwinds that typically favor the party out of power in midterm elections. Key lawmakers in all three of those states remain opposed to redistricting.

A gerrymandering wave hits a wall

Trump kick-started an unusual redistricting plan in July by calling on Texas Republicans to redraw their congressional map to create more favorable districts for the party — even though there was no new census data to base it upon. That triggered a mid-decade redistricting battle the likes of which has not been common since the late 1800s.

Texas, Missouri and North Carolina all approved new Republican-friendly House districts. Ohio, which had to redistrict because of its state constitution, used the opportunity to enact a more favorable House map for Republicans.

But Ohio’s action on Oct. 31 marked a turning point. That same day, Virginia’s Democratic-led legislature took a first step toward redistricting. Then in November, California voters approved new House districts helping Democrats, Kansas Republicans dropped plans for a special session on redistricting, and a Utah judge adopted a new House map that benefits Democrats.

Trump suffered a stunning setback Dec. 11, when Indiana’s Republican-led Senate defeated a redistricting plan that could have helped the GOP win all nine of the state’s U.S. House seats, up from their current seven.

The net result from the 2025 jockeying could be three additional seats for Republicans. But even that is in question, because legal challenges remain in some states, and there is no guarantee that parties will win the districts they redrew.

Virginia may be next up on redistricting

When the Virginia General Assembly begins its annual session, the agenda will include a proposed constitutional amendment allowing mid-decade redistricting in response to other states.

The amendment, which received first-round approval in the fall, would also need to pass a statewide vote before the new districts could be implemented. Quick action would be necessary to get all that accomplished in time for candidates to run in redrawn districts later this year.

Democrats, who currently hold six of the state’s 11 U.S. House seats, have not unveiled what those new districts would look like. But some have talked of trying to gain as many as four additional seats.

Virginia Gov.-elect Abigail Spanberger has embraced the redistricting effort but has not committed to a particular plan.

“I will look at any map that is kind of reasonable and keeping communities compact and together,” Spanberger, a Democrat, told The Associated Press. “But ultimately, it’s up to the people of Virginia to choose whether or not to move forward with the referendum.”

Florida plans an April redistricting debate

Republicans currently hold 20 of Florida’s 28 U.S. House seats. That advantage could grow if districts are reshaped during a special session.

Although Florida’s regular legislative session starts Tuesday, DeSantis said he is waiting until April to call a special redistricting session to allow time for a possible U.S. Supreme Court ruling on a key provision of the federal Voting Rights Act. If the court rules in a Louisiana case that race cannot be the predominant factor in creating voting districts, it could open the way for several Republican-led states to redraw districts represented by Black or Hispanic lawmakers who are Democrats.

DeSantis said the high court’s ruling could affect “at least one or two” Florida districts.

But any redistricting that aids Republicans could face a court challenge. A voter-approved Florida constitutional provision prohibits drawing district boundaries to favor or disfavor a political party or incumbent.

Resistance remains in several targeted states

Some Democrats seeking to counter Trump have urged lawmakers in Illinois and Maryland to redraw their already heavily Democratic districts to try to gain one additional seat in each state. But the plans appear to lack traction as legislative sessions begin Tuesday in both states.

Illinois House Speaker Pro Tem Kam Buckner said “there is no active push” for congressional redistricting.

“There is no appetite to reopen something that will consume enormous time, energy and, frankly, political capital without a compelling justification,” Buckner, a Democrat, told the AP.

Democratic Maryland Gov. Wes Moore has created a special commission to recommend a new congressional map. But Democratic Senate President Bill Ferguson remains opposed and insists that a majority of residents also do not want new districts.

In Kansas, some Republicans want to redraw U.S. House districts to try to gain an additional seat. But House Republicans have failed to gain the two-thirds support needed to override a likely veto by Democratic Gov. Laura Kelly.

House Speaker Dan Hawkins told reporters that he has no plans to hold a vote on congressional redistricting during the annual legislative session that starts Monday.

“I do not have the votes,” Hawkins said.

Associated Press reporters Olivia Diaz, John Hanna, Mike Schneider and Brian Witte contributed to this story.