How Trump's central bank beef could hurt the economy

Summary

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Podcast Summary: The Indicator from Planet Money

Episode Title: How Trump's central bank beef could hurt the economy
Air Date: May 14, 2026
Host: Adrian Ma
Guest: James Jacoby, Director of FRONTLINE’s "The President vs. The Fed"

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Overview

This episode explores the escalating conflict between President Trump and the Federal Reserve, focusing on the implications of Trump’s unprecedented personal and political campaign against the Fed’s independence. Guest James Jacoby, director of a new FRONTLINE PBS documentary, discusses the history of presidential pressures on the Fed, Trump’s recent actions against current and former Fed officials, and what these developments mean for the U.S. economy amid persistent inflation.

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Key Discussion Points & Insights

1. Current Economic & Leadership Context

• Inflation Data: Inflation has risen 3.8% over the past year—its highest since 2023. (00:11)
• Fed Leadership Change: Fed Chair Jerome Powell is being replaced by Trump’s pick, Kevin Warsh, marking a pivotal moment amid ongoing presidential scrutiny of the Fed. (00:34)

2. The Federal Reserve’s Institutional Independence

• Foundational Respect: Across the political spectrum, there is broad if sometimes begrudging, respect for the Fed’s designed independence—even among critics. (02:27–03:27)
• Role by Design: Congress intentionally created the Fed to make long-term, politically insulated economic decisions. (02:50)

  “It was designed by Congress to be independent from political winds and political pressures because it makes long-term economic decisions for the country.”—James Jacoby (02:58)

3. Historical Precedent: The Arthur Burns and Nixon Episode

• Historical Example: Richard Nixon pressured then-Fed Chair Arthur Burns to keep rates low ahead of his re-election, leading to stagflation in the 1970s—an economic cautionary tale. (03:45–05:01)

  “Burns capitulated to the pressure and lowered rates when really things didn’t call for it... what we got was a period... of very high inflation and stagflation... It’s looked back upon as a terrible period of economic history for the United States.”—James Jacoby (04:24)

4. Trump’s Escalating Campaign Against the Fed

• Personal Attacks on Powell: Trump has repeatedly and publicly insulted Powell, even instigating a criminal probe over supposedly excessive spending and undermining his authority. (05:01–05:53)

  “If I want him out, he'll be out of there real fast.”—President Trump, as quoted by James Jacoby (00:48)
  “Trump paid a personal visit... accused Powell of going way over budget on a plant office renovation.”—Adrian Ma (05:13)

• Powell’s Unprecedented Response: Powell responded in a public video—described as looking like a “hostage tape”—outlining the effort as part of a pressure campaign to force lower rates. (05:53–06:14)

  “He goes public with a video... basically announcing there is this criminal probe... saying this is all part of a pressure campaign to pressure the Fed to lower interest rates.”—James Jacoby (05:53)

5. The Mechanics and Makeup of the Fed

• How Interest Rates Are Set: Rates are not decided by one person but by a twelve-member Federal Open Market Committee (FOMC), with the Chair as one vote among many—a sort of “economist Jedi Council.” (06:34)
• Further Attempts to Reshape the Fed: Trump’s interventions have gone beyond Powell, notably in the attempt to fire board member Lisa Cook on what may be shaky legal grounds, triggering an ongoing Supreme Court case. (06:56–07:33)

6. What to Expect from Incoming Chair Kevin Warsh

• Independence in Question: Warsh’s reputation evokes mixed opinions: some in the business world consider him serious and independent, while critics are alarmed by his unwillingness to affirm Trump lost the 2020 election during confirmation. (08:00–08:39)

  “Skeptics... saw plenty of evidence in that confirmation hearing that alarmed them.”—James Jacoby (08:33)

7. The Larger Question: Can the Fed’s Independence Withstand Political Assault?

• Ongoing Pressure: The Fed is in a bind; inflation remains high due to external forces (wars, energy prices), making it hard to justify lowering rates—yet the President’s attacks are likely to continue. (09:00–10:08)

  “What’s unfortunate is that Trump’s attacks on the institution have really changed the conversation... we’re now talking about the very basics of independence versus the ways in which this institution... could and should be reformed.”—James Jacoby (09:52)

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Memorable Quotes & Moments

• On the gravity of Trump-Fed conflict:

  “Economically, this is the most important fight of the second Trump administration.”—James Jacoby (00:48)

• On the unprecedented nature of the attacks:

  “There’s no way... to compare the two. For the Justice Department to be bringing that probe against a sitting Fed chair is completely unprecedented.”—James Jacoby (06:23)

• On what’s at stake for American financial governance:

  “We’re now talking about the very basics of independence versus the ways in which this institution... could and should be reformed.”—James Jacoby (09:50)

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Important Timestamps

• 00:11 – Setting the stage: inflation data, upcoming Fed leadership change.
• 02:27 – Why the Fed’s independence is respected.
• 03:45 – The Arthur Burns/Nixon stagflation cautionary tale.
• 05:01 – Trump’s tactics against Powell and the Fed.
• 05:53 – Powell’s defiant response and the criminal probe.
• 06:34 – How the FOMC works; attempts to fire Lisa Cook.
• 07:33 – Kevin Warsh’s controversial nomination.
• 09:00 – Can the Fed’s independence survive continued assault?

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Overall Tone

The discussion is urgent, analytical, and at times incredulous—underscoring both the gravity and the anxiety surrounding Trump’s attempts to bend economic governance to political ends. Jacoby provides historical perspective and measured concern about the Fed’s capacity to weather this storm, emphasizing what’s truly at risk: not just economic stability, but foundational institutional integrity.

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Transcript

[James Jacoby]

Npr.

[Adrian Ma]

This is the indicator from Planet Money. I'm Adrian Ma. New data this week from the Consumer Price Index shows inflation rising 3.8% over the past year. That is the highest inflation rate we've seen since 2023. And it's happening at a time when the nation's main inflation fighting institution, the Federal Reserve, is getting a shake up in leadership. On Friday, Fed Chair Jerome Powell will be replaced by President Trump's new pick, Kevin Warsh. And as a new documentary by Frontline PBS explains, this is a milestone in Trump's long beef with the Fed.

[James Jacoby]

Economically, this is the most important fight of the second Trump administration. If I want him out, he'll be out of there real fast. This agency feels it is not under

[Adrian Ma]

any obligation to be accountable. Frontline correspondent James Jacoby directed the film, which is called the President versus the Fed. After the break, he shares what he learned while reporting on this unprecedented power struggle between the world's most powerful politician and the world's most powerful bank. This Message comes from Indeed hiring do

[James Jacoby]

it the right way with Indeed sponsored jobs. Claim a $75 sponsored job credit to get matched with quality candidates@ Indeed.com podcast.

[Adrian Ma]

Terms and conditions apply.

[Announcer]

This message comes from Edward Jones where they believe rich means opening yourself to new possibilities. That's why your dedicated financial advisor meets you where you are, helping you move forward with confidence. Let's find your rich Edward Jones member, sipc. This message comes from ixl. With ixl, you get personalized online learning and teaching solutions that help improve achievement improvements, empower teachers and track progress. This One platform for K to 12 helps teachers accomplish what normally would require dozens of other tools. Educators can see how their school is performing in real time to make better instructional decisions. IXL is used in 96 of the top 100 school districts. Learn more at ixl.com NPR James Jacoby

[Adrian Ma]

is director of the new Frontline documentary the President versus the Fed. James, thanks for being here.

[James Jacoby]

Thank you so much for having me.

[Adrian Ma]

For this film, you spoke to economists, Wall street bigwigs, the business press. And what strikes me across all these different kinds of people is there seems to be a very strong respect for the Federal Reserve. Which is not to say that everybody thinks the Fed always gets it right, but there's still an inherent respect for the Fed. What do you make of that?

[James Jacoby]

Yeah, it's something I found so interesting right now, especially when so many institutions are kind of under attack in America across the political spectrum. There's respect for the Fed. Yes, there are grievances with it on both the right and the left. But it was designed by Congress to be independent from political wins and political pressures because it makes long term economic decisions for the country. I too, was surprised that there's kind of this universal appreciation for the Fed's independence and also not that many people willing to defend the President's attacks on the Fed that started actually way back in his first term.

[Adrian Ma]

Before we get to Trump specifically and his beef with the Fed, it does seem there is a natural tension between presidents in general and the Fed because presidents are politicians and they want to see the economy roaring while they're in office. With that, could you tell us about the story of Arthur Burns?

[James Jacoby]

Yeah, it's a story that we point to in the film because it's instructive. Richard Nixon was president. Arthur Burns was the chairman of the Fed at the time. And Richard Nixon was running for reelection, like many presidents, wanted interest rates low because low interest rates get borrowing and spending up and economic activity up. And he put a lot of pressure on Burns to lower rates. And the Federal Open Market Committee at the time, which sets the rates. Yes.

[Adrian Ma]

How are you? All right.

[James Jacoby]

How are you? I'm having a meeting of my Open Market Committee on Tuesday.

[Adrian Ma]

Just kick him in the rump a little. Okay.

[James Jacoby]

Burns capitulated to the pressure and lowered rates when really things didn't call for it. And what we got was a period in the 70s and then into the 80s of very high inflation and stagflation, in fact, when there was low economic growth mixed with inflation. And it's looked back upon as a terrible period of economic history for the United States. There were a lot of other factors that went into it. There were the energy crisis, a lot of other problems economically at the time. But the Fed, having kept rates low and it didn't call for it, is one of the main factors in why we did get really high inflation at that point.

[Adrian Ma]

Of course, this history, this cautionary tale, doesn't seem to be a deterrent for President Trump. And in his second term, he's repeatedly and publicly insulted Powell, like calling him names like Numbskull, saying he has a low iq. Last summer, Trump paid a personal visit to the Fed headquarters, where he stood in front of TV cameras and accused Powell of going way over budget on a plant office renovation.

[James Jacoby]

Are there things the Chairman can say to you today that would make you back off some of the earlier criticism? Well, I'd love him to lower interest rates. Other than that, what can I tell you?

[Adrian Ma]

And as we've covered before on the Show Trump's Justice Department later initiated a criminal probe into Powell. Now, Powell has denied any wrongdoing, but, James, could you say more about Powell's responses to Trump's pressure tactics?

[James Jacoby]

Well, it's really fascinating because he goes public with a video which, as one person in the documentary describes it, looks like a hostage tape, basically announcing that there is this criminal probe and speaking directly about the President, saying that this is all part of a pressure campaign to pressure the Fed to lower interest rates.

[Adrian Ma]

Powell is defiant in the face of pressure that I think would even make Nixon's pressure on Arthur Burns seemed kind of coy.

[James Jacoby]

Oh, yeah. I mean, I don't think there's any way. There's no way to compare the two. I mean, for the Justice Department to be bringing that probe against a sitting Fed chair is completely unprecedented.

[Adrian Ma]

I guess for context here, we should explain that interest rates are not just set by one person. They are voted on by a 12 member board called the Federal Open Market Committee. I sort of think about it as like an economist Jedi Council. Jerome Powell is one member, but he's only one vote. So can you talk about Trump's other efforts to reshape this board to his advantage?

[James Jacoby]

Sure. I mean, the main other event has been the Lisa Cook case, where Lisa Cook was accused of mortgage fraud on a mortgage application that she put in. She wasn't really given an opportunity to respond to the allegation. And basically within days of it being leveled, Trump fired her or at least tried to fire her. And Lisa Cook then sued to stay in her position, alleging that the President didn't have the authority or the cause to fire her. She's remained in her position and that case has gone all the way up to the Supreme Court. So it's not just limited to Powell here.

[Adrian Ma]

President Trump's new pick to be Fed Chair Kevin Warsh will be taking over Jerome Powell's spot. And I think it's fair to say that there are some questions from lawmakers, from people in the business community about whether Warsh can be independent as the Fed is supposed to be, or whether he will just be loyal to what President Trump wants. What do you think after talking to all the people that you interviewed for this piece?

[James Jacoby]

It's mixed reviews. There's a lot of people that I've spoken to in the business world who know Kevin Warsh, who worked with him at the Fed or on Wall street and think he's a very serious person, will take this job really seriously, and that he's independent enough from the President to make his own determinations. I think that skeptics of Warsh looked at his testimony, his confirmation testimony, with alarm because he was unwilling to say that the president had lost the 2020 election, that Trump had lost that election. And so those who are skeptical of whether Warsh will be independent saw plenty of evidence in that confirmation hearing that alarmed them.

[Adrian Ma]

Finally, I guess I'm just interested in your kind of global thought about the Fed. It was created over 100 years ago, designed by Congress to be independent of politics. Does it seem like this design can hold up to the president's continued attacks?

[James Jacoby]

Yeah, it's a great question. I think there's no doubt that the president will continue to attack the Fed going forward because it's going to be very difficult for the Fed to deliver much lower rates right now. Now, given how complicated the inflation picture is. You know, we have the war in the Middle east right now, energy prices skyrocketing, all sorts of inflationary pressures. So it's put the Fed, ironically, in a major bind. There's a lot of outcomes I don't know. You know, what's strange is I've reported on the Fed for a number of other films for Frontline, and they've been rather critical films at the Fed about kind of whether it's mistakes that they've made, identifying the inflationary surge during the pandemic, their use of all sorts of unorthodox financial levers that they've used in order to kind of benefit Wall street and exacerbate wealth inequality in this country. What's unfortunate is that Trump's attacks on the institution have really changed the conversation that we're now talking about the very basics of independence versus the ways in which this institution that's at the center of the American economy could and should be reformed.

[Adrian Ma]

James Jacoby is a correspondent for FRONTLINE PBS. He and you can watch his film the President vs. The Fed on FRONTLINE's website, YouTube or the PBS app. Thanks again for being here, James.

[James Jacoby]

Thank you for having me.

[Adrian Ma]

This episode was produced by Cooper Katz McKim and engineered by Maggie Luthar. It was fact checked by Sierra Juarez. Kate Concannon is our editor and the Indicators of Production of npr.

[Announcer]

This message comes from Edward Jones. Where they believe rich means opening yourself to new possibilities. That's why your dedicated financial advisor meets you where you are, helping you move forward with confidence. Let's find your rich Edward Jones, Member, SIPC this message comes from NPR sponsor Certified Financial Planners. Asking the right questions can greatly impact your future, especially when it comes to your finances. So if you're looking for a financial advisor you can trust, certified financial planner professionals are committed to acting in your best interest. That's why it's gotta be a CFP. Find your CFP [e-mail].