Darian Woods

This is Planet Money from NPR. Over the past week, President Donald Trump has gone from threatening to oust Jerome Powell, the chair of the Federal Reserve, to saying he has no intention of firing him.

And though so far Trump hasn't taken any action to dump Powell, every time Trump's anger at the Fed chair flares, markets quiver and economists start flipping out. Because they say the Fed has to be independent. It has to focus on keeping the economy healthy. And that process must be free from politics and pressure. It needs to just focus on what's right for the economy. But why exactly?

And though so far Trump hasn't taken any action to dump Powell, every time Trump's anger at the Fed chair flares, markets quiver and economists start flipping out. Because they say the Fed has to be independent. It has to focus on keeping the economy healthy. And that process must be free from politics and pressure. It needs to just focus on what's right for the economy. But why exactly?

And though so far Trump hasn't taken any action to dump Powell, every time Trump's anger at the Fed chair flares, markets quiver and economists start flipping out. Because they say the Fed has to be independent. It has to focus on keeping the economy healthy. And that process must be free from politics and pressure. It needs to just focus on what's right for the economy. But why exactly?

Hello and welcome to Planet Money. I'm Darian Woods.

Hello and welcome to Planet Money. I'm Darian Woods.

Hello and welcome to Planet Money. I'm Darian Woods.

Today on the show, a primer on the Fed. From the Indicator podcast, we have three ways of looking at that question for you today. We'll look at what the Fed does, why its independence is so important, and one quieter step President Trump has taken to influence the Fed this year. The Federal Reserve, the US central bank, has two big goals, keeping prices stable and jobs plentiful.

Today on the show, a primer on the Fed. From the Indicator podcast, we have three ways of looking at that question for you today. We'll look at what the Fed does, why its independence is so important, and one quieter step President Trump has taken to influence the Fed this year. The Federal Reserve, the US central bank, has two big goals, keeping prices stable and jobs plentiful.

Today on the show, a primer on the Fed. From the Indicator podcast, we have three ways of looking at that question for you today. We'll look at what the Fed does, why its independence is so important, and one quieter step President Trump has taken to influence the Fed this year. The Federal Reserve, the US central bank, has two big goals, keeping prices stable and jobs plentiful.

The Fed can do things like change interest rates to address inflation. Raising interest rates can bring down prices. But it could also make new mortgages more expensive. And it can put people temporarily out of work. Economist Carol Abinder of the University of Texas told us these can be unpopular moves for a politician.

The Fed can do things like change interest rates to address inflation. Raising interest rates can bring down prices. But it could also make new mortgages more expensive. And it can put people temporarily out of work. Economist Carol Abinder of the University of Texas told us these can be unpopular moves for a politician.

The Fed can do things like change interest rates to address inflation. Raising interest rates can bring down prices. But it could also make new mortgages more expensive. And it can put people temporarily out of work. Economist Carol Abinder of the University of Texas told us these can be unpopular moves for a politician.

And when we say the Fed is independent, we don't mean it's completely separated from democracy. While a president can't say lower interest rates when they feel like they're getting too high, the Fed is accountable to the public in other ways.

And when we say the Fed is independent, we don't mean it's completely separated from democracy. While a president can't say lower interest rates when they feel like they're getting too high, the Fed is accountable to the public in other ways.

And when we say the Fed is independent, we don't mean it's completely separated from democracy. While a president can't say lower interest rates when they feel like they're getting too high, the Fed is accountable to the public in other ways.

Last summer, Republican Senator John Kennedy grilled Fed Chair Jerome Powell. I got two seconds. So when are you going to lower interest rates?

Last summer, Republican Senator John Kennedy grilled Fed Chair Jerome Powell. I got two seconds. So when are you going to lower interest rates?

Last summer, Republican Senator John Kennedy grilled Fed Chair Jerome Powell. I got two seconds. So when are you going to lower interest rates?

As much as politicians might want to control interest rates, they can't. And that's thanks to an accord between the Treasury and the Federal Reserve in 1951. In the US, inflation was running high after World War II and during the Korean War. But the Fed had a problem. It was effectively controlled by the Treasury Department, which was led by the president's treasury secretary.