Name: Can the Fed stay independent under Trump? | The Dip Podcast
Uploaded: 2026-01-16T16:53:59.000Z
Duration: 18 min 19 s
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It's another round of President Trump versus Federal Reserve Chair Jerome Powell.

Now, for months, Trump has been putting pressure on Powell to lower interest rates.

But in this round, the Trump administration's Department of justice is upping the ante.

Powell says they've opened a criminal investigation into him that essentially accuses him of splurging on Fed building renovations.

Now, normally, Powell embodies one of the most important characteristics for central bankers, which is that he's incredibly boring, or at least his statements are.

I'm sure he's a lot of fun at parties, but

in these statements, he's usually keeping it calm and cool, right?

But in the one released on Sunday where he talks about this criminal investigation, he got pretty spicy, at least central banker, spiky spicy.

The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president.

This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether, instead, monetary policy will be directed by political pressure or intimidation.

and more, we're joined by DW's own Janelle Dumalouan in Washington, D.C. and Peter Rashuti.

He's a professor at the Freeman School of Business at Tulane University.

How did you feel when you saw this news come through?

Because Trump has been putting pressure on Jerome Powell for a bit of a while now?

I mean, the investigation was a really unprecedented step.

So from my perspective, I did find it quite shocking.

So we've not actually heard from Powell that much since that video message that he released, you know, the one that has become famous now for the unusual level of directness, the unusual level of pushback against the president.

It feels to me like he said his piece and then what, went back to stoic relative silence?

What he said, of course, boomeranged around the halls of Washington, prompting criticism of the investigation from.

I don't know if you've heard some of the remarks, remarks from the likes, for example, of Senator Lisa Murkowski of Alaska.

She said that this was a clear attempt from the administration to coerce the Fed.

Larry Kudlow, one of Trump's former economic advisers from the first term, also slammed the investigation.

And perhaps most notably, we also heard from Treasury Secretary Scott Besant.

Who also reportedly trolled Trump that this investigation actually impedes their ability to get the Fed candidate that they want in place.

So the President, on the other hand, you know, he's remained vocal about him.

He's asked about Powell almost every day this week.

He said Powell was either incompetent or crooked, saying that jerk will be gone soon.

But then he also told Reuters that he has no intention of firing Powell and too early to determine what to do.

So mixed bag there, but I guess we're going to get into all that.

Yeah, there's a lot to unbraid here, right.

But Peter, I want to turn to you because the common wisdom is that central bank independence is vital to the long term health of an economy, no matter if it's the US or another country.

And we've not seen very many examples of central banks who are entwined with politics and then that country doing well.

So what's your read of the situation of the importance of independence here?

It's the most important thing in the markets, the most important thing to the economy.

It's very difficult to, first of all be an investor.

You just can't really know where things are going to go.

And all the ideas that have been floated around like lowering rates on credit cards and housing and such is a lot more complicated than it's being presented as.

And Janelle, why is Trump putting the pressure on now when Powell only has just a few months left in his term?

So it's fair to say he's been putting pressure on Powell pretty consistently.

Like throughout since being back in office.

The really new thing here is the investigation.

But the investigation, it's also coming at a time where Trump has reportedly lashed out at the DOJ and lashed out at his US Attorneys for not turning off to prosecute his enemies.

And that timing is interesting because he reportedly did that right before these subpoenas for the Fed were issued.

We know that Powell's term is ending in May.

There's been a lot of supporting to suggest that many in the Trump administration would have preferred a patient waiting out till Powell was out of the chairmanship.

So there's been a lot of speculation as to why he appears to be ramping up the pressure.

Now, really what I want to know though is you've outlined all these reasons that Trump should have maybe just Let sleeping dogs live.

You've got like four months left left with Powell.

Yeah, I mean, I wanted to say that, like, he, the approval, the low approval ratings, this is a phenomenon that he is experiencing now, right, like on the economy.

And there has been some speculation to suggest that, in fact, what he is looking for in Jerome Powell is escape growth.

This is somebody who doesn't know to raise the interest rates when he should.

It's impacting the economy, it's keeping your borrowing costs high.

And you know what, he might even be crooked.

Look at the suspicious building project that he has undertaken.

So I think that, you know, difficult to say whether that's true or not, but

this is definitely a speculation that has been floated.

Okay, we'll get back to the politics of it all in just a second.

But, Peter, the reaction from the markets wasn't that explosive, despite the fact that, as you said, the independence of the Federal Reserve is a very serious thing and could have serious impacts down the road.

You know, I think that is hard to explain, really.

What, this is exact opposite of what the markets want.

I think what, what Powell is doing, by the way, they've, you know, said he was an idiot and all that, which is ridiculous.

Trump was saying Powell was an idiot and so on.

And, you know, Trump was saying that, you know, Powell was an idiot and all of that kind of thing.

First of all, the people we have at the Fed are the brightest people I know.

I have former students there, I have friends there.

I mean, they're smarter than me, they're better dressed, they have less body fat.

And the idea that they, they, that a politician should be able to have more say in that.

The other thing is Powell is doing the right thing.

There are indications in the labor market and there are indications at GDP that things might be inflating.

And so to lower rates like the President wants is very, very dangerous.

Because if you lower rates, the economy will be stimulated.

And on the short term, that's going to be great.

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Can the Fed stay independent under Trump? | The Dip Podcast

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