Interest Rate Game Has Strong Undercurrents; Powell Uses Volcker, Former Fed Chair, to Subtly Criticize White House Pressure

Why did Powell emphasize the independence of the Federal Reserve in his speech?

Cailian Press, March 22 (Editor Zhao Hao) — Federal Reserve Chairman Jerome Powell stated in a recent speech video that former Chairman Paul Volcker set an example for public officials and emphasized that “independence and integrity are inseparable.”

On Saturday (March 21) local time, the Fed released a pre-recorded speech video on its official website, in which Powell expressed gratitude for being awarded the “Paul Volcker Public Integrity Award” by the American Society for Public Administration (ASPA).

“I regret that I cannot be there in person today, but I sincerely thank you for this honor and for the opportunity to share my thoughts,” Powell said. “It is a great honor to be mentioned alongside former Chairman Volcker.”

In the early 1980s, then-Fed Chairman Volcker resisted pressure from the White House to cut interest rates, and through sustained aggressive rate hikes, brought U.S. inflation down from double-digit levels, playing a key role in establishing the credibility of the central bank’s anti-inflation efforts.

Powell stated, “Volcker is a giant in economics and central banking, perhaps the greatest public servant in our economic field. He dedicated his life to selfless service, courage, and maintaining the highest integrity for the public, which has become a valuable legacy he left behind.”

Powell mentioned that Volcker was appointed by presidents from both the Republican and Democratic parties as Treasury Secretary and Fed Chair, representing “that non-politicized, non-partisan service is the cornerstone of the Federal Reserve, and Paul Volcker exemplified this virtue.”

Powell believes that Volcker stood firm against external pressures when deciding to raise interest rates, demonstrating the ‘courage and long-term perspective’ needed in public service.

“Paul Volcker set an example for all public officials to follow. His actions remind us that independence and integrity are inseparable — we need independence to do the right thing, and integrity to use that independence wisely.”

Source: Federal Reserve official website

This series of statements naturally brings to mind Powell’s current situation: because the Fed did not cut interest rates as quickly as Trump demanded, Powell and other central bank officials are facing ongoing criticism from the White House.

Earlier this week, the Fed maintained the federal funds rate target range at 3.5% to 3.75% for the second consecutive time. After the decision, several officials hinted that rate cuts would be postponed until the Middle East conflict ends.

At the press conference, Powell said higher energy prices would temporarily push up overall inflation, but it is still unknown how the Middle East situation will impact the U.S. economy and for how long.

Powell also mentioned that if the new Fed Chair nomination is not confirmed by the Senate in a timely manner, he will serve as acting chair as required until the new nominee is confirmed.

Powell’s term expires in May, and Trump has officially nominated Kevin W. Warsh as his successor. However, some Republican senators have stated they will not support Trump’s nominee until the investigation into Powell is withdrawn.

Earlier this year, the U.S. Department of Justice served a subpoena to the Fed, threatening to file criminal charges related to Powell’s testimony before the Senate Banking Committee in June 2025 regarding the Fed’s office building renovation project.

(Cailian Press, Zhao Hao)