The Daily Friend January 17, 2026
Jerome Powell’s eloquent defence of Federal Reserve independence, delivered in a two-minute YouTube video on January 11th, was an inspiring act of courage.
The 72-year-old outgoing Fed chairman spoke after receiving a grand jury subpoena that threatened a criminal indictment over his Congressional testimony about renovations to Federal Reserve buildings.
Powell called alleged cost-overruns a pretext. The real issue, he said, was Federal Reserve independence. “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.”
He continued, “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation.”
The urgency of Powell’s public defiance of the president is revealed by his coming to Fed headquarters on a Sunday evening. That recalls a momentous Saturday emergency meeting of the Fed’s policy-making committee on October 6th, 1979. With inflation at 9% and unemployment at 6%, then Fed Chairman Paul Volcker shocked financial markets with an exceedingly tough programme of interest-rate increases and a sharp slowdown in money growth to break the back of inflation.
Volcker’s actions prompted a political outcry and calls for his impeachment. Defying subsequent demands for interest-rate cuts, Volcker told a Congressional committee he had no plans to do that. He went on, “We have to call the shots as we see them.”
Later, in the summer of 1984, writes Volcker in his memoir Keeping at It, President Reagan’s chief of staff Jim Baker, in the presence of the president, told Volcker, “The president is ordering you not to raise interest rates before the election.” Volcker writes that he said nothing. He wrote in his memoir “I was stunned…the president clearly overstepped his authority by giving an order to the Fed.”
In 2017 President Trump nominated Powell to the Fed chairmanship, a decision he says was among his worst ever. Since returning to the presidency, he has assailed Powell’s judgement, policies and intelligence. Despite three successive Fed interest-rate cuts, Trump is demanding that there be more.
The Justice Department investigation of Powell has triggered a wave of bipartisan opposition. The three living former Fed chairmen have denounced the administration’s action as an “unprecedented attempt to use prosecutorial attacks to undermine Fed independence.” This, they said, “is how monetary policy is made in emerging markets with weak institutions.”
In the Sunday night video, Powell said he would not be intimidated and that he would “continue to do the job the Senate confirmed me to do.” His second four-year term expires in May.
What the Wall Street Journal calls the fiasco concerning Powell may have weakened the candidacy of Kevin Hassett, a leading candidate to succeed Powell. Hassett heads the White House Economic Council, and is seen as a Trump loyalist. Hassett has defended the investigation into Powell, saying that if he has done nothing wrong, he should have nothing to fear. A furious Republican member of the Senate banking committee says he will block action on all prospective Federal Reserve nominees.
Ted Truman, a former Federal Reserve policy-maker, says he is appalled by the administration’s assault on Fed independence, and he predicts that the action is likely to backfire. That may already be happening, as the president said on January 14th that he had no intention of firing Powell.
Ironically, events of recent days have strengthened the case for Federal Reserve independence. Whether or not the president knew of Justice department plans, there is a perception that the action was overreach, the crossing of a line that called into question the independence of the world’s premier central bank.
Barry D. Wood has been reporting on the Federal Reserve for four decades, first as economics editor at Voice of America, then for market watch, and RTHK radio in Hong Kong.
Daily Friend January 17, 2026
Barry D. Wood 