\n \ufeff\u201cThe 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,\u201d Powell said. \u201cThis is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions \u2014 or whether instead monetary policy will be directed by political pressure or intimidation.\u201d\n <\/p>\n
\n The fact that Powell spoke out forcefully against the Trump administration this week for the first time is all the more notable because Powell has long treasured and promoted the Fed\u2019s independence, which he sees as tantamount to its mission to help American households live better lives.\n <\/p>\n
\n It enables the Fed to do its core mission: making jobs plentiful and keeping prices in check, even when politically imprudent.\n <\/p>\n
\n Economists, academics and former Fed officials broadly agree that safeguarding Fed independence is necessary for the soundness of the US economy. It ensures policymakers can make tough decisions on interest rates that are rooted in economic reality and not the whims of whoever controls the White House.\n <\/p>\n
\n For example, a president may want lower rates to grow the economy and send stocks higher, but that policy could hurt Americans by sending prices out of control.\n <\/p>\n
\n Powell has been an ardent defender of the Fed\u2019s ability to set interest rates free of politics throughout Trump\u2019s relentless pressure campaign over the past year.\n <\/p>\n
\n For example, during a press conference in July, Powell was asked about Trump\u2019s recent attacks on him and the Fed. Powell didn\u2019t engage \u2013 but offered a long defense of the Fed\u2019s independence.\n <\/p>\n
\n \u201cI\u2019ll just say that, so I think that having an independent central bank has been an institutional arrangement that has served the public well. And as long as it serves the public well, it should continue and be respected. If it didn\u2019t serve the public well, then it wouldn\u2019t be something that we should just automatically defend,\u201d Powell said. \u201cBut what it gives us and other central banks, what it gives you is the ability to make these very challenging decisions that in ways that are focused on the data and the evolving outlook, the balance of risks and all of things we talk about, and not political factors.\u201d\n <\/p>\n
\n Trump noted that the Fed is hardly alone \u2013 governments of advanced economies across the world have put distance between monetary policymakers and politicians.\n <\/p>\n
\n \u201cIf you were not to have that, that would be a great temptation, of course, to use interest rates to affect elections, for example,\u201d Powell added. \u201cAnd that\u2019s something that we don\u2019t want to do.\u201d\n <\/p>\n
![\"An](\"https:\/\/www.newsbeep.com\/ca\/wp-content\/uploads\/2026\/01\/ap25338619698065.jpg\")
<\/p>\n
\n Previously, the closest Powell had come to criticizing Trump was in November 2024, when he was asked whether he would leave his post early if Trump demanded it.\n <\/p>\n
\n \u201cNo,\u201d Powell said in a press conference.\n <\/p>\n
\n Asked to elaborate, Powell said, \u201cNot permitted under the law.\u201d\n <\/p>\n
\n Why the about face? Because Powell viewed the potential prosecution as an existential threat that could forever politicize the Fed, undermine its credibility and upset global markets and the economy.\n <\/p>\n
\n That\u2019s part of the reason central bankers from around the world rallied to Powell\u2019s defense Tuesday. In the statement, the world\u2019s central bankers stressed that the independence of central banks is a \u201ccornerstone of price, financial and economic stability\u201d and that protecting that independence with full respect for the law is critical.\n <\/p>\n
\n The statement praised Powell for serving with \u201cintegrity\u201d and for his \u201cunwavering commitment to the public interest.\u201d\n <\/p>\n
Fed remains independent, for now<\/p>\n
\n Among the many problems with Trump\u2019s demands for the Fed to lower rates is the perception of political interference when the Fed does take that action. The Fed in the second half of last year lowered interest rates three times in a row, though Trump has asked for more. Trump has said the United States should have rates that are among the lowest in the world and that he should have a say in rate decisions.\n <\/p>\n