ARI SHAPIRO, HOST:
Since taking office, President Trump has signed 89 executive orders. Our colleagues from The Indicator, Wailin Wong and Darian Woods, zoom in on one of these executive orders and what it could mean for the future independence of the Federal Reserve.
DARIAN WOODS, BYLINE: Trump signed an executive order in mid-February to make sure that agencies follow the president's priorities. It put tighter control on how these agencies spend and regulate, and it applied to agencies like the Security and Exchange Commission, the Federal Trade Commission and the Federal Reserve.
WAILIN WONG, BYLINE: The Federal Reserve has two main jobs. The first one is what we hear about most of the time, making sure there's not too much inflation or unemployment. That's what wonks call monetary policy.
WOODS: The other main job is keeping banks running smoothly, and it does this by regulating and supervising the financial system. Both of these jobs are done at arm's length from Congress or the president. So when it came to these executive orders, there was one big asterisk for the Federal Reserve. It only applies to the Federal Reserve's role in safeguarding the financial system. It doesn't apply to the Fed's raising and lowering of interest rates to fight inflation and to protect jobs - you know, monetary policy. Kathryn Judge is a law professor at Columbia University.
KATHRYN JUDGE: There is an effort to signal, look, we don't want to mess with monetary policy. So it seeks to provide a little bit of calm.
WONG: Kathryn says it's widely accepted that less independent central banks end up with higher inflation.
JUDGE: Trump doesn't want to stoke fears that we're going to have persistent inflation by changing the leadership structure of the Fed or his control over the Fed in ways that would give him the ability to dictate interest rates.
WOODS: The evidence is less clear about the effects of having the Fed's bank supervision and regulation role under the grip of politicians. But the big question is how this division would work in practice.
WONG: It also raises questions over how the Fed might intervene when something goes wrong. For example, when Silicon Valley Bank ran into financial trouble in 2023, the Fed stepped in to lend it money. Would those decisions now be subject to White House review?
WOODS: Kathryn says, the problem with this approach is if the White House begins to meddle in some functions of the Fed, it would undermine other decisions made by the individuals at the Fed.
JUDGE: You have these individuals who are playing multiple roles. And how credible is it that they're going to maintain independence on one front and not others?
WONG: Fed Chair Jerome Powell has been fielding more questions lately over whether his decisions on interest rates will be influenced by Trump or, for that matter, Elon Musk. Here's what Powell told a House committee last month about potential executive branch interference.
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JEROME POWELL: What we're going to do at the Fed is keep our heads down and keep working, wait to see what new policies emerge and try to make a thoughtful, sensible set of policies on our part once we understand the implications of those.
WOODS: We reached out to the White House to ask how this division would be managed. According to a senior administration official, the Office of Management and Budget will oversee all the Fed's regulations not related to monetary policy. We also asked if it could erode the credibility of the Fed's decisions to raise or lower interest rates. The same statement said, no, and to, quote, "include that accusation in your story would not be accurately reporting the executive order." Darian Woods.
WONG: Wailin Wong, NPR News.
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