Breitbart Business Digest: The Fed War Heats Up

Powell Takes Aim at Trump

Welcome back to Friday! This is the Breitbart Business Digest weekly news roundup, where we run through the news of the last seven days even without the power to subpoena those who ignore our emails.

This week saw the launch of Fed War 2026. Surprisingly, the shot heard ’round the world was not fired by President Donald Trump but by Federal Reserve Chair Jerome Powell, who insisted he was merely defending his territory from an unwelcome intrusion of Justice Department interferers.

Jay Powell vs. Donald Trump, Revisited

The struggle between Donald Trump and Jerome Powell began long ago. Janet Yellen’s term as chair of the Fed was coming to an end, and the president was looking for the right person to replace her. Trump is not a conventional dove on monetary policy, but he is very committed to being a low-rate guy. Like any good real estate developer, he thinks you can build a lot more when you can get a low rate. Since there’s a lot of work to be done in the U.S., he wants U.S. businesses and the federal government to borrow at low rates.

We’re told that Trump rejected several candidates as too attached to keeping rates high. Trump became convinced that Powell would be friendlier to his view on rates, in part because then-Treasury Secretary Steve Mnuchin gave him this advise and in part because that’s the impression Powell left when meeting with Trump. So, Trump nominated Powell, believing he was choosing a partner in his economic agenda to run the Federal Reserve.

So, it came as something of a shock to the president when the Fed, under Powell’s leadership, engaged in a prolonged campaign of rate hikes, raising interest rates at just about every other meeting, despite inflation consistently undershooting the Fed’s two percent interest rate target. The Fed appeared to be attempting to undermine Trump’s economic agenda by strangling it with restrictive rates.

Flash forward to the Biden administration. This time around, inflation was rapidly pushing above the Fed’s target. But Powell declared that the inflation would be transitory and appeared to accept the Biden administration’s views that it was supply constraints and turmoil abroad driving prices upward. There was no criticism at all from the Fed, even quietly, about the massive deficit spending program of President Biden, despite its obvious inflationary effects.

The Fed did eventually hike rates, but by then it was too late. Inflation soared to the worst rates in 40 years. What’s more, the Fed appeared to do so only reluctantly, with Powell almost apologizing for hiking rates. The firming of monetary policy that had come easily during the first Trump administration was treated as something to be undertaken only as a last resort under the Biden presidency.

This did not look anything like an independent monetary policy. Instead, it appeared that the Fed had chosen sides. Fed participation in DEI programs only hardened the impression that the Fed was no longer independent but had become part of the progressive policy apparatus.

When the 2024 election approached, the Fed suddenly decided to start cutting rates again. Instead of waiting until after the election, the Fed began cutting several weeks ahead of the election. We will probably never know if it was Powell’s intention to send the message that the inflationary crisis had passed, which was a key message of the Biden and Harris campaigns. To many people, this looked like more evidence that the Fed was defending its favored political party against the Trump GOP.

Just as suddenly as the rate cuts had begun, they came to a halt when Trump took office. Making things even worse, Powell and other Fed officials made it clear they were holding rates steady because they believed—without evidence, as the legacy media likes to say about every claim Trump makes—that two of President Trump’s signature policies—tariffs and immigration restriction—were likely to be inflationary. The Fed was very obviously taking sides against the Trump administration’s economic agenda.

There’s no real room for dispute over the basic fact that under the leadership of Powell, the Fed has aggressively pursued restrictive monetary policy when Trump has been president and aggressively stuck to an accommodative policy during the Obama and Biden presidencies. You can probably come up with rationales for each of the Fed’s moves, but the consistency with which the Fed turned restrictive when faced with Trump in the White House and dovish when Democrats occupied the Oval Office makes those explanations look like, well, pretexts.

Powell Panics

This week opened with Powell declaring—via the unprecedented step of releasing a Sunday night video statement—that the Justice Department had sent subpoenas to the Fed regarding the renovations of the central bank’s D.C. headquarters and Powell’s testimony about those renovations to a Senate panel. Powell went much further than to deny any wrongdoing. He claimed—without evidence—that the inquiries were merely “pretexts“ and that the real goal was to undermine the independence of the Fed. He also claimed he was being threatened with criminal prosecution by the Justice Department.

President Donald Trump and Federal Reserve Chair Jerome Powell tour the Federal Reserve’s renovation project on July 24, 2025, in Washington, DC. (Chip Somodevilla/Getty Images)

Less than a week later, it’s now very clear that there’s no good evidence to support the idea that the subpoenas were part of a coordinated campaign to seize authority over monetary policy. Many in the Trump administration were caught off guard by the news that Powell had been subpoenaed, including major players in Trump’s economic team. The subpoenas had come from the office of Janine Pirro, the U.S. Attorney for the District of Columbia, without any consultation with either the Attorney General or President Trump, according to all credible reports. Pirro says she was forced to issue the subpoenas because the Fed refused to respond to less formal inquiries.

What’s more, this idea of a coordinated attack on Fed independence doesn’t really make sense. Powell’s term as chair is over in about four months. After that, Trump will get to appoint his successor. There was no need to go after Powell with the Department of Justice to weaken his hold on the Fed. That was happening no matter what.

In a sort of repeat of the Russia hoax, the legacy media and the Democrats they control (including many economists) immediately decided that the interpretation of these events that sheds the worst light on Trump must be the correct one. Powell’s panic led to a few GOP Panicans declaring that they would not support Trump’s nominees until the investigation was “resolved.” There were numerous opinion pieces and editorials breathlessly declaring that Trump was risking Fed independence and with it the entire global economy.

Not irrelevant to all this, on Friday we learned from the New York Times that Powell had spent years building relationships on Capitol Hill that he could use to his advantage in a clash with President Trump. In other words, Powell has indeed been campaigning among lawmakers, lobbying to build a case against Trump. The independence of the Fed now means a Fed that engages in backroom political campaigns.

We suspect that history will not see Powell as the last defender of Fed independence but as the leader whose actions put it most at risk.

The Boom They Mistook for a Bust

After a long period in which the economy had too little demand for labor and an abundance of workers, adjusting to an economy of labor scarcity will take some adjustment. To be more specific, businesses are adjusting quite quickly to this new reality, while analysts and pundits are still caught in their old mindset of counting jobs created as a sign of the health of the economy and of particular sectors. We’re calling this the Payroll Fallacy. As long as unemployment is low, however, growth in employment in one sector must come from contraction in another. And growth in the economy must come from improved productivity rather than population and payroll expansion.

This week saw the Payroll Fallacy go into overdrive with regard to the U.S. manufacturing sector. An opinion piece in the Washington Post declared that “Trump’s promised manufacturing boom is a bust so far.” The evidence? “Manufacturing employment has declined every month since April, when the president said tariffs would bring factories ‘roaring back.'” As if a memo had gone out with the party line, Bloomberg featured a nearly identical opinion piece.

But factories are roaring back. After factory output hit rockbottom in the fourth quarter of 2024, it has rebounded under Trump. Productivity is rising. And, importantly, the factory sector in the U.S. has become investible again because domestic manufacturing is no longer seen as being in an offshoring death spiral.

For the latest evidence of this, look no further than the industrial production figures released Friday by the Fed. It showed that the production of business equipment in the U.S. is up 10.1 percent in December compared with a year ago.

We’re so back, baby. If only we didn’t have that turbulent Powell at the Fed trying everything he can to slow us down. And, come June, we will not.

Happy Sovereignty Day!

Although most Americans trace the birth of our country to July 4, 1776—while others would trace it back further into the colonial settlement era—a good case could be made for January 14, 1784. That’s the day that the Continental Congress ratified the Treaty of Paris. This formally established American sovereignty and independence. What we had declared eight years earlier became a legally recognized reality.