Podcast Summary

Consider This from NPR

Episode: What happens if the Fed loses its independence?
Date: January 13, 2026
Host: Juana Summers
Guest: Adam Posen, President of the Peterson Institute for International Economics

Overview

This episode of Consider This explores the escalating conflict between President Trump and Federal Reserve Chairman Jerome Powell. It examines the potential consequences for the U.S. and global economies if the Fed's long-standing independence is undermined by political interference, especially amidst DOJ subpoenas over building renovations and mounting presidential pressure. The conversation delves into why central bank autonomy matters, the risk of policy paralysis, and how trust in American institutions could be permanently altered.

Key Discussion Points & Insights

1. The Evolution of Trump–Powell Relations

• Early Praise Turned Hostility
  • Trump initially praised Powell as his nominee for Fed Chairman in 2017, calling him “strong,” “committed,” and “smart.” [00:03]
  • The relationship soured dramatically during Trump’s presidency, with Trump labeling Powell “a political hack,” “stubborn mule,” and “stupid person” over disagreements regarding interest rates and Fed policies. [01:01]
• Presidential Pressure and Scrutiny
  • Trump has publicly pressured Powell to drastically cut interest rates and criticized him for cost overruns in Federal Reserve building renovations. [01:17]

2. Escalation: DOJ Investigation into the Fed

• The Federal Reserve received grand jury subpoenas regarding the expensive renovation of its headquarters and Powell’s Senate testimony on the project. [02:05]
• Powell responded with a rare, forceful public statement denouncing “the threat of criminal charges” as a consequence of maintaining Fed independence. [02:26]
  • Scott Horsley paraphrasing Powell:
    “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.” [02:26]

3. Why Fed Independence Matters

• Adam Posen's Analogy:
  Central bankers should be treated like “surgeons or airline pilots”—accountable for outcomes but free from interference while performing technical work. [05:01]
• Consequences of Interference:
  Posen warns that politicizing the Fed leads to “bad outcomes,” most notably higher inflation, because markets expect monetary policy to serve political interests rather than economic fundamentals. [06:01–07:32]
  • Adam Posen:
    “When an elected executive tries to put pressure on the head of a central bank… you end up with higher inflation because they get them printing money at times when it’s not justified… and that becomes self-fulfilling.” [07:05]

4. Powell's Uncharacteristic Outspokenness

• Powell has been “extremely restrained and careful” under public attack, but the DOJ subpoena prompted him to “draw a line” and call on Congress to uphold the Fed's independence. [07:47]
  • Posen notes that the issue of building cost overruns, even if true, is a congressional—not criminal—matter and that the public confrontation is unprecedented. [08:22]
  • Adam Posen:
    “He had to make an appeal so that the public and markets would see that this was at least as unprecedented for the President to do something like this.” [07:56]

5. Congress’ Role and Questions of Accountability

• The Fed is more accountable to Congress than to the President; congressional committees oversee the Fed’s activities according to the Federal Reserve Act. [08:20]
• Powell’s statement aims to spur Congress to “step up and exercise its constitutional role.” [08:39]

6. Succession Challenges and the Risk of Paralysis

• With Powell’s term as Chair nearly over, Trump will nominate a replacement, but political standoffs loom. Some senators, such as Thom Tillis (R-NC), have threatened to block any Trump nominee if the DOJ investigation is unresolved. [09:12]
• Adam Posen outlines two scenarios:
  1. Powell could remain on the Board of Governors, potentially still influencing Fed policy.
  2. If he leaves, Trump would quickly gain a majority of appointees on the Board, though not necessarily within the Federal Open Market Committee (FOMC).
• Possible outcome: Decision-making paralysis, with split votes and “no clear direction” for monetary policy. [09:35]

7. The Larger Implications for Trust in Institutions

• Posen argues that the damage to the Fed’s independence could be “irreversible” if political intervention continues, undermining faith in technocratic, rule-based governance. [10:48]
  • He warns that inflation will likely be higher and more persistent because the public will expect less discipline from a politicized Fed. [11:13]
  • Adam Posen:
    “You’re making pretty irreversible changes to how much people can trust in the power of institutions… and that will be a cost that we’ll all pay for an ongoing period.” [10:48, 11:55]

Notable Quotes & Memorable Moments

• President Trump, on Jerome Powell (then/Past):
  “He’s strong, he’s committed, he’s smart…” [00:03]
• President Trump, on Jerome Powell (now/Recent):
  “He’s got some real mental problems. No, he’s. Something wrong with him.” [00:28]
• President Trump, on Fed spending:
  “The Fed is supposed to sit there and say where interest rates are going and a couple of other very easy things to do. And he spent 2.5 billion, doll. I think he’s, you know, I think he’s got some problems.” [01:17]
• Scott Horsley quoting Powell:
  “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.” [02:26]
• Adam Posen, on DOJ investigation:
  “The president or the administration is trying to intimidate a hardworking bureaucrat just trying to do the right thing… it’s a power gambit by the president and his team to force the Fed to set interest rates and set monetary policy in ways contrary to their judgment of what’s Best.” [05:27]
• Adam Posen, on why Fed independence isn't ‘abstract’:
  “Independence in this case is what we call operational independence. So it’s like you have an airline pilot or a surgeon. You don’t want the patient or their family or the passenger on the plane telling them how to run the plane or do the operation while they’re doing it.” [06:21]
• Adam Posen, on political interference:
  “You end up with higher inflation because they get them printing money at times when it’s not justified for purposes to pay off things the elected official wants.” [07:13]
• Adam Posen, on institutional trust:
  “You’re making pretty irreversible changes to how much people can trust in the power of institutions… and that will be a cost that we’ll all pay for an ongoing period.” [10:48, 11:55]

Timestamps for Key Segments

• Trump’s changing rhetoric on Powell, Fed building scrutiny: [00:00–01:29]
• Context on DOJ subpoenas and Powell’s statement: [01:52–02:37]
• Why the Fed’s independence is essential (Posen): [05:01–07:32]
• Powell’s unusual public statement and call to Congress: [07:32–09:12]
• Succession fight and risk of Fed paralysis: [09:12–10:42]
• Big-picture consequences for Fed, inflation, and institutions: [10:42–11:55]

Conclusion

This episode highlights the unprecedented nature of the current standoff between the Trump administration and the Federal Reserve. With congressional oversight in question, DOJ probes, and a looming leadership struggle, the episode underscores how political pressure on the Fed could have lasting consequences for inflation, economic stability, and Americans’ trust in foundational institutions.