Maintaining stability is key to the economy. That's getting harder.

Summary

Consider This from NPR Episode: Maintaining Stability is Key to the Economy. That's Getting Harder. Release Date: April 22, 2025

In this episode of NPR's Consider This, hosts delve into the increasing challenges faced by the Federal Reserve in maintaining economic stability amid political pressures and policy uncertainties. The discussion centers around Federal Reserve Chair Jerome Powell's efforts to combat inflation, the impact of President Donald Trump's trade policies, and the broader implications for the U.S. and global economy.

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1. The Federal Reserve’s Mandate and Independence

The episode opens with a reflection on the Federal Reserve's core mission to stabilize the economy and mitigate downturns. Ari Shapiro sets the stage by referencing Janet Yellen's 2017 emphasis on financial education and the importance of the Federal Reserve's role:

Ari Shapiro [00:00]: "Back in January of 2017, when Janet Yellen was chair of the Federal Reserve, she spoke to a group of economics teachers in a national town hall meeting."

Scott Horsley reinforces this by highlighting the Fed's responsibilities:

Scott Horsley [00:33]: "Stabilizing the economy and mitigating a downturn, of course, also happened to be among the Federal Reserve's primary responsibilities."

The discussion underscores the Fed's commitment to independence from political influence, a principle Jerome Powell reiterated during his speech to the Economic Club of Chicago.

2. Jerome Powell Under Political Scrutiny

Jerome Powell's dedication to the Fed's independence is a focal point. Powell stated:

Scott Horsley [01:02]: "We're never going to be influenced by any political pressure. People can say whatever they want. That's fine, that's not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors."

Despite this, Powell faced direct criticism from President Trump, who accused him of being ineffective:

Donald Trump [01:51]: "I don't think he's doing the job. He's too late, always too late, slow."
Donald Trump [01:57]: "I let him know it, and if I want him out, he'll be out of there real fast, believe me."

Trump's attacks intensified after Powell linked the administration's tariffs to economic downturns, predicting higher inflation and slower growth.

3. Impact of Tariffs on the Economy

The imposition of tariffs by President Trump has significant repercussions. Powell assessed that the tariffs would adversely affect the economy:

Scott Horsley [01:26]: "The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth."

These tariffs disrupt global trade dynamics, leading to increased prices for consumers and strained international relations. The International Monetary Fund (IMF) supports Powell's stance, forecasting a "big hit to global trade and slower economic growth."

4. IMF’s Support and Economic Outlook

The IMF's chief economist, Pierre Olivier Garrincha, echoed concerns about the administration's tariff strategy:

Scott Horsley [05:13]: "Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook."

Garrincha criticized the haphazard implementation of tariffs, which exacerbates economic drag and uncertainty. The IMF warns of a potential "combination of slow growth and stubborn inflation," posing a unique challenge for the Federal Reserve, which traditionally addresses these issues with opposing strategies—cutting rates for slow growth and raising them to combat inflation.

5. Political Tensions and Potential Consequences

The tension between the Federal Reserve and the Trump administration has significant implications. Trump's public denouncement of Powell as a "major loser," coupled with suggestions of his potential removal, threatens the Fed's stability:

Scott Horsley [06:29]: "I think that would be devastating if he's not able to remain in place until his term is over. I think that would be highly counterproductive and lead to more turmoil in financial markets and ultimately a much weaker economy."

Senator John Kennedy, a Republican on the Banking Committee, weighed in, asserting that the president lacks the authority to remove the Fed chair:

Donald Trump [07:58]: "The Fed was designed to be insulated from political pressure so it can do the unpopular thing when necessary, that is, keep interest rates high to bring inflation under control."

This move against Powell not only undermines the Fed’s authority but also risks instigating market instability.

6. Market Reactions and Future Outlook

The conflict culminated in a significant market response when Trump’s attacks led to a stock market sell-off:

Scott Horsley [06:43]: "Investors in general have been hostile to the president's trade war, and they really don't like it when Trump tries to monkey with the Federal Reserve."

However, the market showed resilience as it rebounded following signals of potential de-escalation in the trade war:

Ari Shapiro [08:21]: "After the big sell off yesterday, the stock market rebounded today. Is that a vote of confidence in Powell?"

Treasury Secretary Scott Besant indicated expectations for trade de-escalation, which was positively received by investors, leading the Dow Jones Industrial Average to surge by over 1,000 points (2⅔ percent).

7. Conclusion: The Road Ahead

The episode concludes with reflections on the precarious balance the Federal Reserve must maintain in navigating inflation and growth amid political and economic turbulence. Ari Shapiro encapsulates the situation:

Ari Shapiro [02:55]: "Federal Reserve Chair Jerome Powell has been fighting inflation for years, and often it seems like there's a curveball just as things are getting better."

The ongoing trade tensions and political pressures present a formidable challenge to economic stability, underscoring the critical role of the Federal Reserve in safeguarding the economy's future.

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Notable Quotes:

• Jerome Powell: "We're never going to be influenced by any political pressure... we will do what we do strictly without consideration of political or any other extraneous factors." [01:02]

• Donald Trump: "I don't think he's doing the job. He's too late, always too late, slow." [01:51]

• Scott Horsley on IMF's stance: "Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook." [05:13]

• Senator John Kennedy: "I don't think Trump or any president has the authority to remove the Federal Reserve chairman." [07:58]

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Produced by: Michael Levitt
Audio Engineering: Jimmy Keeley
Edited by: Courtney Dorning and Rafael Nam
Executive Producer: Sami Yenigun

Transcript

[Ari Shapiro]

Back In January of 2017, when Janet Yellen was chair of the Federal Reserve, she spoke to a group of economics teachers in a national town hall meeting.

[Scott Horsley]

Consumers skilled in managing their finances are better prepared to weather bad times. And stronger household finances overall can help sustain growth, stabilize the economy, and mitigate an economic downturn.

[Ari Shapiro]

As she highlighted the importance of teaching kids about money and the economy, Yellen also highlighted the central job of the Board of Governors she chaired.

[Scott Horsley]

Stabilizing the economy and mitigating a downturn, of course, also happened to be among the Federal Reserve's primary responsibilities.

[Ari Shapiro]

The Federal Reserve Board of Governors and its chair try to stabilize the economy and mitigate a downturn by overseeing financial institutions and setting interest rates. And they do it independent of politics. The current Federal Reserve chair, Jerome Powell, underscored that independence last week when he spoke to the Economic Club of Chicago.

[Scott Horsley]

We're never going to be influenced by any political pressure. People can say whatever they want. That's fine, that's not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.

[Ari Shapiro]

Powell didn't only underscore that independence, he demonstrated it when he said that President Donald Trump's signature economic policy, tariffs, would would likely hurt the economy.

[Scott Horsley]

The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth.

[Ari Shapiro]

Higher inflation and slower growth. That assessment prompted a series of attacks from President Trump. Speaking to reporters in the Oval Office on Thursday, Trump threatened to fire Powell.

[Donald Trump]

I don't think he's doing the job. He's too late, always too late, slow.

[Scott Horsley]

And I'm not happy with him.

[Donald Trump]

I let him know it, and if I want him out, he'll be out of there real fast, believe me.

[Ari Shapiro]

And in a series of posts on his Truth Social platform, he referred to Powell as a, quote, major loser, too late and wrong for failing to cut interest rates. Legally, the president can't fire the Federal Reserve chair. But on Friday, Trump's chief economic adviser, Kevin Hassett, told report that the White House is exploring how to fire Powell despite the legal guardrails on his position. Then Tuesday afternoon, Trump backpedaled, saying, quote, I have no intention of firing him. Consider this. The job of the Federal Reserve chair is to maintain calm and stability in the US Economy. Jerome Powell may be fighting an uphill battle. From npr hi, I'm Ari Shapiro.

[Donald Trump]

Donald Trump has an extraordinary approach to the presidency. At the NPR Politics podcast, we're recapping the first 100 days of Donald Trump's second term, from his early promises to his policy decisions and what it all means for you. Politics may not always make sense, but we'll sort it out together over on the NPR Politics podcast.

[Ari Shapiro]

Climate change is drying up some water supplies and making others undrinkable. That's why Here and Now Anytime is covering the hunt for fresh water, from a pipeline in the Great Lakes to the science of desalination to extreme recycling that turns sewage into clean drinking water. That's Here and Now Anytime, a podcast from NPR and wbur. At Planet Money, we'll take you from a race to make rum in the Caribbean.

[Donald Trump]

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[Scott Horsley]

The best in the world.

[Ari Shapiro]

With the lab streaming up the most.

[Scott Horsley]

Advanced microchips, it's very rare for people.

[Ari Shapiro]

To go inside to the back rooms of New York's Diamond District.

[Donald Trump]

What are you looking for? The stupid guy here, they're all smart.

[Scott Horsley]

Don't worry about Planet Money from npr.

[Ari Shapiro]

We go to the Story and take you along with us wherever you get your podcasts. It's consider this from npr. Federal Reserve Chair Jerome Powell has been fighting inflation for years, and often it seems like there's a curveball just as things are getting better. The latest is tariffs. Today, the International Monetary Fund is supporting Powell's assessment with a gloomy forecast. The IMF warns that Trump's tariffs will lead to slower economic growth and a longer battle to slow inflation. NPR's Scott Horsley covers the economy, and I spoke to him about Powell's job security and and where the economy might be headed. How big a blow to the global economy is this trade war?

[Donald Trump]

It's significant. The IMF is not going so far as to project a global recession, but it is forecasting a big hit to global trade and slower economic growth. As a result, President Trump's now imposed import taxes on almost everything the U.S. buys from other countries. And the IMF's chief economist, Pierre Olivier Garrincha, says the haphazard way these tariffs have been rolled out have only added to their drag on the economy.

[Scott Horsley]

Beyond the abrupt increase in tariffs, the surge in policy uncertainty is a major driver of the economic outlook. If sustained, the increase in trade tensions and uncertainty will slow global growth significantly.

[Donald Trump]

And the IMF has downgraded its growth forecast for the US this year by almost a full percentage point. It's also projecting higher prices so we could see a combination of slow growth and stubborn inflation, which would be a real challenge for the Federal Reserve. Why is that, well, ordinarily, the Fed's answer to slow growth is to cut interest rates, but its answer to fighting inflation is to raise interest rates. So if it's battling both at the same time, it could be sort of caught in this tug of war. The IMF stressed that central banks around the world are going to have to remain agile and independent of political pressure. Now, in the U.S. president Trump has been trying to ratchet up the political pressure on the Fed to cut interest rates. Trump's been blasting the central bank in social media posts. In one post, he called Fed Chairman Jerome Powell a major loser. Now, all that has some investors worried that the president might actually try to fire Powell and replace him with someone more malleable. Speaking to the Economic Club of New York last week, chief economist Mark Zandi of Moody's said firing Powell would be a recipe for a market meltdown.

[Scott Horsley]

I think that would be devastating if he's not able to remain in place until his term is over. I think that would be highly counterproductive and lead to more turmoil in financial markets and ultimately a much weaker economy.

[Donald Trump]

And we got a little taste of that yesterday, Ari, when Trump once again went after the Fed chairman and the stock market just plummeted. Investors in general have been hostile to the president's trade war, and they really don't like it when Trump tries to monkey with the Federal Reserve.

[Ari Shapiro]

You know, the president uses social media to comment about all kinds of things. Why is the Fed different? Why shouldn't he comment on the Fed?

[Donald Trump]

He can comment all he likes. He just can't threaten the Fed chairman's job or otherwise try to bend the central bank to his will. Now, Trump did say this evening he has no intention of firing Powell. The Fed was designed to be insulated from political pressure so it can do the unpopular thing when necessary, that is, keep interest rates high to bring inflation under control. Powell told the Economic Club of Chicago last week. Most lawmakers get that Fed independence is.

[Scott Horsley]

Very widely understood and supported in Washington, in Congress, where it really matters. And, you know, the point is we can make our decisions, and we will only make our decisions to best serve the American people.

[Donald Trump]

The case in point is Louisiana Senator John Kennedy, who sits on the Banking Committee, which oversees the Fed. Kennedy is a Republican, but he told NBC's Meet the Press over the weekend he doesn't think Trump or any president has the authority to remove the Federal Reserve chairman.

[Scott Horsley]

My experience with Jay Powell is that he's got tiger butt. He's going to do what he thinks is right and he's not going to go down in history as the Federal Reserve chairman that allowed inflation to become wild as a March Hare. And he's going to do what he thinks he's got to do.

[Donald Trump]

Powell also has the Supreme Court precedent on his side, although the Trump administration's urging the high court to reconsider.

[Ari Shapiro]

Well, after the big sell off yesterday, the stock market rebounded today. Is that a vote of confidence in Powell?

[Donald Trump]

Investors are really voting for some relief in the trade war. Treasury Secretary Scott Besant has emerged as the administration's good cop on trade. And Bloomberg and others reported today that Besant expects some de escalation in the standoff between the US And China, suggesting these triple digit tariffs between the world's two biggest economies are not sustainable. So investors like the sound of de escalation. And the Dow Jones industrial average jumped more than 1,000 points, or 2⅔ percent.

[Ari Shapiro]

That's NPR's Scott Horsley. This episode was produced by Michael Levitt with audio engineering by Jimmy Keeley. It was edited by Courtney Dorning and Rafael Nam. Our executive producer is Sami Yenigun.

[Donald Trump]

Foreign.

[Ari Shapiro]

It'S consider this from NPR. I'm Ari Shapiro.

[Unknown]

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