Jerome Powell and the Future of Fed Independence

**Erika Beras** (0:01)
This is Planet Money, from NPR.
Today is Jerome Powell's last day. As Fed chair, at least, he'll still be on the Fed board that he's allowed to do until 2028

**Kenny Malone** (0:14)
Now, some quick hits from what has been a pretty eventful tenure. The Powell Fed faced a once-in-a-century pandemic.

**Erika Beras** (0:22)
Oversaw the economy as inflation spiked to 9.1% and then went back down to nearly 2%.

**Kenny Malone** (0:29)
And now, as inflation has started to go back up, as the US has gone to war and continues to try and levy the most comprehensive tariffs since the 1940s.

**Erika Beras** (0:39)
But beyond all that, perhaps Powell will be most remembered as a target of angry tweets, speeches, ultimately a criminal investigation by President Trump and his administration, the very president who nominated him in the first place.

**Kenny Malone** (0:56)
And I remember the moment. We at Planet Money really started paying attention to the Trump-Powell tensions. It happened about 10 months after Powell was appointed, back in 2018
The Federal Reserve had raised rates a few times. Inflation was still sort of uncomfortably high. And the day before the upcoming Fed meeting, President Trump tweets that it is, quote, incredible that, quote, the Fed is even considering yet another interest rate hike. And then tweeted again the next day that the Fed better not, quote, make yet another mistake.

**Erika Beras** (1:30)
Later that day, the Fed did do another interest rate hike. They seemed to ignore the president's tweets. But at the time, we had simply never seen anything like this before. For most Americans' lives, this kind of presidential meddling was unprecedented.

**Kenny Malone** (1:45)
Because it is generally understood to be quite bad for the president of the United States to strong arm the chair of the Federal Reserve. Because it's impossibly important for our central bank to not worry about the short-term political whims. The Fed will often need to do unpopular things that politicians don't like, such as raising interest rates and slowing down the economy before inflation inflates.

**Erika Beras** (2:12)
This idea is known as Fed Independence, and those tweets kicked off a semi-regular unofficial series at Planet Money about Fed Independence. We even tried to create a Fed Independence holiday. We even had a special guest.

**Kenny Malone** (2:26)
So special.

**Erika Beras** (2:26)
Endorse that holiday.

**Kenny Malone** (2:28)
Big special.

**Janet Yellen** (2:29)
This is Janet Yellen, former chair of the Board of Governors of the Federal Reserve. I want to wish everybody a very happy Fed Independence Day.

**Kenny Malone** (2:40)
Yell it from the rooftops, Janet. Get the Hallmark cards out.
That hasn't really taken off, but that's okay. Because generally speaking, the kinds of Fed Independence episodes that we have made over the last eight years, they looked at the famous case studies of other times a US president tried to pressure their Fed chair. These are history stories.

**Erika Beras** (3:01)
Because history stories are what you look to when you're in the middle of something, when you don't know how your own story is going to end.

**Kenny Malone** (3:09)
Well, as of today, folks, we finally do know how our story ends, or at least Jerome Powell's. And honestly, that story was wilder and more alarming than we could have ever imagined back in 2018
Hello and welcome to Planet Money. I'm Kenny Malone.

**Erika Beras** (3:27)
And I'm Erika Beras. Today on the show, where does the Jerome Powell story fit into the sweep of history? We'll hear from someone who was on the Fed board when Powell became chair and when Trump started to pressure Powell.

**Kenny Malone** (3:41)
Plus, we will learn what signs to watch for to tell whether Fed independence is crumbling or standing strong as the new Trump-nominated Fed chair takes office.

**Erika Beras** (4:01)
Up until now, there have only really been two cautionary tales in Fed independent history.

**Kenny Malone** (4:07)
Right, let's call them two entries in, I want to say Fed Independence Hall of Fame, but that's not quite right. I guess it's the Fed Hall of Infamy, yes?

**Erika Beras** (4:14)
Yeah, that sounds right.

**Kenny Malone** (4:16)
Two entries. And each of them teach us what happens when a president starts to pressure a Fed chair and just how bad it can get.

**Erika Beras** (4:24)
The first of those moments?

**SPEAKER_4** (4:26)
Bill, I just want to thank you for your most thoughtful and generous letter, and I appreciate it so much.

**Erika Beras** (4:32)
This is President Lyndon B. Johnson, days after taking office, calling to introduce himself to then Fed Chair William Bill McChesney Martin.

**Kenny Malone** (4:42)