The Fed has never been tested like this. It could emerge stronger than ever |
Politics & Government
The Fed has never been tested like this. It could emerge stronger than ever
The Fed is on a path for its independence to be reaffirmed sometime this year, as policymakers gather to decide interest rates for the first time in 2026
ByJoseph Zeballos-Roig
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Published 16 hours ago
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Renovation work continues on the Marriner S. Eccles Federal Reserve Board Building, the main offices of the Board of Governors of the Federal Reserve System on December 9, 2025 in Washington, DC. (Andrew Harnik/Getty Images)
The Federal Reserve has been tested before. Harry Truman in the 1950s pressured Fed policymakers to keep interest rates low so the U.S. could wage the Korean War. The showdown ended with then-Fed chair William McCabe forced to resign, but not without forging an agreement underpinning today's concept of central bank independence from the White House.
The accord faced its first major trial in 1964. Lyndon Johnson physically shoved then-Fed chief William Martin at his Texas ranch once the central bank raised interest rates to tighten credit and ward off rising inflation. “Martin, my boys are dying in Vietnam, and you won’t print the money I need,” Johnson said, pressing him to stick to an easy-money policy to finance the intensifying Vietnam War. Martin didn't budge.
But the central bank has never been tested to the limits as it has been under President Donald Trump. He has savaged Fed chair Jerome Powell constantly for almost a year and counting for not slashing interest rates quicker. He's carried out a scorched-earth campaign to get the Fed to fall in line. He's attempted to fire Fed Governor Lisa Cook over allegations of mortgage fraud, and the Department of Justice took the extraordinary step of opening a criminal probe into Powell........