Waylon Wong
Appearances
Planet Money
A primer on the Federal Reserve's independence
Katherine says it's widely accepted that less independent central banks end up with higher inflation. Research backs this up.
Planet Money
A primer on the Federal Reserve's independence
It also raises questions over how the Fed might intervene when something goes wrong. For example, when Silicon Valley Bank ran into financial trouble in 2023, the Fed stepped in to lend it money. Would those decisions now be subject to White House review?
Planet Money
A primer on the Federal Reserve's independence
Fed Chair Jerome Powell has been fielding more questions lately over whether his decisions on interest rates will be influenced by Trump or, for that matter, Elon Musk.
Planet Money
A primer on the Federal Reserve's independence
Jerome Powell's term as chair expires next year. So if Trump wants to go in a different direction on monetary policy, that would be his earliest opportunity.
Planet Money
A primer on the Federal Reserve's independence
And I'm Waylon Wong. This is NPR. Thanks for listening.
Planet Money
A primer on the Federal Reserve's independence
The Fed has more credibility. Investors and the public generally believe it will try to do what it takes, and that's important in getting the job done.
Planet Money
A primer on the Federal Reserve's independence
Right. The president appoints the members of the Federal Reserve Board. The Federal Reserve's goals, low inflation and high jobs, are set by Congress. And the agency is accountable to Congress.
Planet Money
A primer on the Federal Reserve's independence
And this is not the first time Trump has raised this possibility of interfering with the Fed or even firing Powell. Trump has been loudly critical of Powell for years now. And since January, the president has accused him of playing politics by keeping interest rates high.
Planet Money
A primer on the Federal Reserve's independence
That didn't mean that presidents didn't try to influence the Fed. Like think of Arthur Burns, Fed chair in the 1970s.
Planet Money
A primer on the Federal Reserve's independence
The Bank of Japan, the Bank of Mexico, and the Bank of England became independent in the 1990s. The European Central Bank was built as independent from day one. And the evidence suggests that independence works to control inflation.
Planet Money
A primer on the Federal Reserve's independence
Exactly. Carolina also talks about countries that have eroded their central bank independence.
Planet Money
A primer on the Federal Reserve's independence
That said, Kerala says the public does want accountability. Like, how did we even get such high inflation? What went wrong? How can we avoid that happening again?
Planet Money
A primer on the Federal Reserve's independence
And I'm Weyland Wong. Why is the independence of the Federal Reserve so sacred? Why does just the idea of Trump interfering with the Fed send economists into a tizzy?
Planet Money
A primer on the Federal Reserve's independence
Trump signed an executive order in mid-February to make sure agencies follow the president's priorities. It put tighter control on how these agencies spend and regulate. And it applied to agencies like the Securities and Exchange Commission, the Federal Trade Commission, and the Federal Reserve.