Trump clashes with US central bank chair over building renovation

0:04Hello and welcome to Business Matters. I'm Roger Hearing. On the programme today, Donald Trump arrives on the doorstep of his own central bank to pile the pressure on the Fed to lower interest rates. Also the luxury goods industry under severe pressure, profits at LVMH down by over a fifth, plus the rise of a new woman's football team in the Netherlands. And we take the temperature of the fandom at the world's most important Comic Con convention as it opens in San Diego. And I'm going to be joined throughout the programme by two guests on opposite sides of the world. Alexander Kaufman, award-winning reporter and author of the newsletter Field Notes on Substack, who's joining us from New York.

0:43Alexander, very good evening to you. Thank you for having me. Good to be here. Good to have you there. And also joining us is Meymal Safra, journalist and analyst. Now, Meymal, you're normally based in Lahore, but you're currently in California, I gather. Yes, Roger. I'm visiting my family over here. Very nice, too. For the holidays, yes. Yes, well, lovely. And I should say, a good afternoon, I suppose. Is that right? I mean, I'm trying to think timing-wise. Yes, it's around 5pm, yes. Anyway, you're both very welcome, obviously, to be joining us here on Business Matters. Let's start, as we always do, by getting a sense of what's going on where you are.

1:17Now, Maymar, I'm taking you unawares because you're in California and you normally are thinking about Pakistan. But in either place, what's caught your eye news-wise? Well, you know, I'm in Pakistan. The monsoons have wreaked havoc. More than 200 people, around 245 people actually have died. And it includes around 118 children during the recent monsoon rains in the country. And, you know, I've been watching, we have cameras at home, back at home. So we keep checking, you know, just if there's, you know, because there are like slash floods happening, especially in Punjab and across other parts of the country as well.

1:54and it's really worrying because you remember, Roger, that back in 2022 we had record-breaking monsoon rains and nearly one-third of Pakistan was sub-MERS and more than 1 ,700 people lost their lives and over 8 million people were displaced. So, you know, I'm really, really worried about this, the climate change and everything else that's happening back then. Yeah, it is very worrying. I remember those bizarre, awful images, as you say, in 2022. Let's hope things don't get as bad this time around. Alexander, let me come to you. What's caught your eye in New York today? Well, just a few hours ago, the Trump administration filed a lawsuit against our mayor, Eric Adams, and New York City for our sanctuary city laws.

2:41the local statutes that forbid the police department here from working with federal law enforcement to deport people for immigration offences alone. Yeah, so that's going to be an interesting development where that goes in terms of changing it or policing it, I imagine. Yeah, we'll keep abreast of that. Well, let's talk about something else that the president has been doing today. he doesn't often get closely involved in the workings of the central bank, the president generally. The Federal Reserve tends to keep itself independent. Within the last few hours, however, Donald Trump left the White House and drove 10 minutes down across town to K Street to visit the Fed in person.

3:26Now, he's already been on their doorstep metaphorically, roundly criticising everything from the Fed's policy on interest rates to the amount that they're spending on a big building renovation project. and now he's gone to see it all for himself. Well, here's a flavour of his encounter with the Fed chairman, Jerome Powell, with the president initially reflecting on what he says is the cost overrun of the renovation. So we're taking a look and it looks like it's about 3.1 billion, went up a little bit or a lot. So the 2.7 is now 3.1. I'm not aware of that. Yeah, it just came out. Yeah, I haven't heard that from anybody at the Fed.

4:08It just came out. Well, at this point, President Trump takes out a sheet of paper from his pocket and he hands it to the Federal Reserve chair. And here's how Jerome Powell responded a few seconds later when he'd finished reading it. You're including the Martin renovation. That's our entire capital. You just added in a third building is what that is. That's a third building. It's a building that's being built. No, it was built five years ago. We finished Martin five years ago. It's part of the overall work. A bit of an awkward moment, but later the president was asked about his previous threat to fire Jerome Powell, and he said he didn't need to.

4:48To do that is a big move, and I just don't think it's necessary, he told reporters. Well, I've been talking about all this to Nancy Marshall-Genzer, who's senior reporter at Marketplace in Washington. She follows the Federal Reserve closely. What did she make of the encounter? Extremely awkward. And I would characterize this as a power play, because as you said, President Trump kind of backed off his veiled threats to fire Powell. But he was still on Powell's turf and Powell was having to show him around this construction site. And then they had that very odd, very public disagreement. So definitely a power play here from President Trump.

5:30This is all about politics. And that thing about the renovation, I mean, it might seem marginal, but I think it's one of the ways he's trying to suggest he could actually fire Powell. He said he didn't need to. But it's one of those bits where he's saying, oh, your cost is overrunning, your administration is not working. That's a reason to get rid of you. Yeah, I mean, some people are speculating that the Trump administration may be trying to lay the groundwork to fire Powell. The Banking Act of 1935 says top Fed officials can only be fired for cause. Question is, would cost overruns on this project be considered cause?

6:06The OMB director, Russell Vogt, sent a letter to Powell demanding explanations. And some people have said this could be laying the groundwork for firing Powell, but it's really not at all clear. All right. Well, Nancy, obviously, the main thing, the thing that he really cares about is interest rates. And he's still pushing very hard for those to come down. I mean, what's going to happen? Is the Fed going to say, oh, well, if he's coming to our house, coming in and wagging his finger, we might change our minds? No, definitely not. And as you probably know, the Fed is meeting next week on interest rates.

6:42The other thing is, Roger, Chair Powell does not control interest rates by himself. There is a 12-member committee, the Federal Open Market Committee, that votes on interest rates. And you'd have to get a majority of them to vote to cut rates in order for that to happen. So Trump is certainly piling the pressure on Powell, but I really think the Fed is going to stand pat next week. I do not think they're going to cut rates. Yes. So what does it say, though, about the operation of these two parts of the U.S. Constitution? It's a very odd thing to see. It is so odd. And the thing is, you know, if Trump were to actually fire Powell, it could really backfire on him and lead rates higher instead of lower.

7:30Because really, the Fed only controls short-term interest rates. The longer-term rates are set by the market, and the Fed tries to guide them with signals about what it's going to do. But if the market sensed instability and the Fed was not indeed going to be independent, investors would start demanding a higher interest rate to buy U.S. Treasury bonds because they would be anticipating inflation. Nancy Marshall Genza. Well, I also spoke to Loretta Mester, who's a former Cleveland Fed president. She's currently in Philadelphia. What does she think is going on in the relationship between the Fed and the White House?

8:06It's another episode in the continuing saga of the president trying to get the Fed chair to lower interest rates. And that antagonism to the Fed and to Chair Powell, no good can come of that because there's a large body of research that shows and experience that shows that in emerging market economies and in advanced economies, you want to have your central bank setting monetary policy focusing on the goals that Congress or the Treasury has given it. And those always include price stability. You don't want the central bank to be looking at short run political considerations, for example, lowering interest rates to lower the cost of servicing the debt, which President Trump has mentioned as a reason why he wants lower rates, or making it, you know, gin up the economy before an election per se and not care about the inflationary consequences of that.

9:08So you really want to separate out monetary policy and allow the policymakers to make decisions independently from those short run, more politically driven goals. Yeah, I mean, it's that principle. It's that principle of independence, which is really important. And a lot of it's been recognized across most of the Western world. But nobody should think that today's going to the building project at the Fed is because of the building project. I mean, in general, right, you want to have Congress hold the Fed accountable for their monetary policy decisions and also hold them accountable for other aspects, including building.

9:53But that's not what today was about. Today was another example of trying to put political pressure on the Federal Reserve, and that's undermining credibility of the institution. But it also is going to make it much more difficult for the next chair coming in. And so, again, I don't believe it's something that is actually, even if you put yourself in the administration's shoes, it's going to be productive. And I agree with your reporter who had said, look, it may not even lower interest rates today, especially as aggressively as the president has said he wants to lower them, will actually lead to lower long-term interest rates.

10:33In fact, it may boost them because market participants are going to be worried about higher inflation and the loss of independence. And they're going to demand higher interest for actually holding U.S. debt. So it doesn't seem like a winning strategy. No, and, Laura, I mean, it does seem almost literally Donald Trump moving his tanks onto the lawn of the Fed in that way. I mean, performative, as you say, but clearly intended to be taken as a bit of pressure. In the end, is there a threat, do you think, to the independence of the Fed? Well, I think they're trying to influence monetary policy decisions, but they won't be able to do that.

11:09Jerome Powell and his Fed policymakers are not going to change how they go about their work. They're going to focus on price stability and maximum employment, which are the goals that they've been given by Congress. They're going to do sound analysis. They're going to consider the risk to both parts of those goals. And they're going to set monetary policy to the best of their judgment, consistent with achieving those goals. That was Loretta Mesta, who's a former Fed president in Cleveland. Alex, did you see this happening? What did you make of it? From the very start of this administration, President Trump has been clear about seeking to erode the independence of formerly independent parts of the federal government.

11:56It's not just the Federal Reserve that has leadership that is appointed by the president, but then afterward operates independently. The FCC, the Nuclear Regulatory Commission, the FTC, these are all examples of agencies that have operated this way. And through an executive order in, I believe, his second month in office, the president challenged this idea and started to rein those in and more aggressively handle them and use them to implement his agenda more directly. So the idea that he would do this to something like the Fed is not inconceivable, but the effects of it on the broader global economy are obviously much greater and riskier.

12:37So he's experiencing greater pushback to that. Yeah, Meymal, it looks like something that you don't really expect to see, this mixing of independents and non-independents and the president really trying to control everything. Well, you know, Roger, we've seen such things in our part of the world. And, you know, we because there's a lot of meddling of the politics into into, you know, banks and other things and policies like this. But, you know, I mean, it's interesting what's going on in the U.S. U.S. politics is like because, you know, I was reading this very interesting piece in The Atlantic, which basically said that, you know, Trump doesn't think that Powell is bad at his job.

13:16It's just that he believes that the Feds should speed up the economy and the Republican administrations and slow it down under the Democratic one. So basically, it's just all about, you know, politics and not about who's good at their job or not. Yeah. Well, I mean, so much of this seems to be exactly in what you're saying, not really even economics at all. And there's another interesting development really in the last few hours, which seems to bear that out. Now, the U.S. Federal Communications Commission, the FCC, has actually given its approval to a merger between Paramount Global and Skydance Media.

13:50And this clears the way for an$8.4 billion sale of some of the most prominent names in U.S. entertainment. What about CBS, Paramount Pictures, Nickelodeon? And it's not going to notice that Paramount recently paid$16 million to settle a case against them filed by President Trump over an interview with former Vice President Kamala Harris. Paramount also eliminates its diversity, equity, inclusion programs, again, aligning with the Trump administration's view. And it also, as you might also notice, cancelled the late show with Stephen Colbert, a chat show that has been extremely critical of the president.

14:27And now they get the thing they want to, which is the approval of this particular merger. Let me talk about this with Meg James, senior entertainment industry writer for the Los Angeles Times. He joins us now. Meg, this is a very, very big deal, isn't it? Yes, this deal we've been watching here in Hollywood for more than a year and a half. And today it finally cleared its biggest hurdle, which was to, as you pointed out, gain the FCC's approval. And, you know, the FCC is technically obviously not an arm of the government. I mean, they have Democrats on it and they have Republicans on it. But it was certainly being said when Paramount was making these various things, was paying off some cases, that this was all with an eye to getting the White House approval that would mean that this deal could go ahead.

15:16I mean, is it too paranoid to see that as the cause? Is it too paranoid? No, I would say not. But it was just three weeks ago that Paramount settled this case that most First Amendment experts here in the United States said really had no merit. But they settled the case because it was widely seen as the prerequisite to get the Federal Communications Commission, which is headed by appointee of President Trump, to approve this major deal. And the Stephen Colbert show, the late night show, again, something that's been a bit of a thorn in the side of the Trump administration. And is it entirely coincidental it gets cancelled?

15:56They said for financial reasons just before this deal goes through. Yes. I mean, again, the timing is very curious. And CBS has been quite insistent that the late night programming block has really begun to struggle financially. They're not getting the younger men that those shows once did. But the fact that they, you know, got rid of the show, or at least it's going to be on through next May. But the fact that they announced that this show will be cancelled really, really became a much bigger news story than CBS intended. Yeah. And Meg, I mean, I suppose the question to an outsider is, are people in your industry rather worried that there seem to be the bosses seem to be kowtowing to politics when a lot of what the people in the entertainment industry are supposed to do is challenge power, surely?

16:46That is the rub, right? And that's why there was so much consternation about the settlement talks. The fact that CBS's parent, Paramount, wouldn't stand up for First Amendment values, for press freedoms, really, really caused a lot of anxiety and concern that, you know, where does it end? And on the commercial side, I mean, we're talking about if this goes through and it hasn't, it's not been given permission, but they haven't actually signed on the bottom line yet. But this is going to mean CBS, Paramount Pictures, Nickelodeon, lots of others all bundled in. Is this a huge monopoly now of entertainment?

17:29Not really, because in the last few years, you've seen Amazon come in in a big way, Apple come in in a big way, and Netflix has really become the most dominant streamer. So Paramount has struggled in recent years. And the reason why a lot of people in Hollywood really, at least in the initial stages, was looking forward to this deal is because it brings the Ellison family, Larry Ellison, one of the co-founders of Oracle, to back this studio that dates back, you know, more than 110 years. So it's in a way the old style media perhaps getting its act together because of the threat from the new style media.

18:10Um, we will see if that's what happens. I'm too soon to say, Roger, it really is. Yeah, but it's a big move. Anyway, thanks so much for talking us through that, Meg. Meg James there of the Los Angeles Times. Yeah, Maymal, it is interesting. I mean, on those two things, really, the way in which the media landscape is changing and whether it is in the US, perhaps rather tipping its hat too much to the White House. Roger, the thing is that, you know, I'm all too familiar with media censorship in Pakistan. And, you know, I mean, we've had a lot of media censorship over the year that I've been in journalism for over 20 years now.

18:45But, you know, in the U.S., this is something new for a lot of people in many ways. And the statement from the Writers Guild actually basically said that, you know, yes, cancellation. I mean, also about the Colbert show that, you know, cancellations are part of the business. But a corporation in terminating a show in bad faith due to explicit or implicit political pressure is dangerous and unacceptable in a democratic society. So this is something, I think, which is new for people in the US. But, you know, I mean, as I said, this presidency is also, you know, very unpredictable, unprecedented in many ways.

19:18Yes, and I suppose we should say up front that, I mean, all these things could be coincidental. They don't necessarily have to be all, you know, it's all above all in that sense. But it has to be investigated, of course. And that's what they've asked for in investigation, that, you know, look into it, whether it was due to political pressure or not. Well, Alexander, what do you think about all this? You know, to me, I'm a bit frustrated by the fact that so much of the political discourse around this in recent days has focused on the Colbert show cancellation and less so on the scandal at 60 Minutes.

19:50You know, that is a... Well, just fill us in on that's the one about the interview with Kamala Harris, right? That's correct. And, you know, there was a lawsuit over, you know, editorial decisions that were made by this premier investigative news show in the U.S. There are a few shows like it in American television journalism. And it was quite clear to many people watching this that, you know, they bowed to pressure. And, you know, that is at least what the executive producers who stepped down from there said. So to me, well, you know, to me, a late show exists to make money for a network. and if it fails to do so, then, you know, so be it.

20:28But an investigative news programme being altered in any way due to the business or political considerations of the network or the president, to me, is a true journalistic travesty. So I wish that there was more outrage and attention on that than a comedian's show. OK, well, let's take that on. Do you see a direct line between them caving in on the 60-minute show and issuing the apology and all the rest of it and them getting the deal that they clearly wanted? Do you see that that is payback in effect? You know, there seems to be quite clearly a relationship between the decision to settle something that I think a lot of people with knowledge of the First Amendment think, you know, would not have been a victory for the president and this ultimate, you know, business outcome.

21:15Whereas, on the other hand, the late show was losing$40 million a year. It could have been the case that both things are true, that it was maybe a political consideration and a good excuse to cut ties with something that wasn't making as much money as the network wanted. Yeah, and Maymall, you've been talking about how this kind of thing happens in Pakistan quite a bit. Can they learn from Pakistan? Is there a way to push back against this? Because in the end, big money will dictate what these companies are prepared to do. Well, you know, actually, to be honest, the Pakistani journalists in Pakistan are quite resilient.

21:50And we fought back against military dictatorships and authoritarian regimes as well. And we continue to do our part. If, you know, some people were laid off from mainstream media, then they went to digital and they started their own YouTube channels. And, you know, of course, there was censorship to that extent as well. And there was harassment and other things. but a lot of our journalists are very brave and I must pay tribute to them that, you know, they keep doing what they do best in the speed of journalism. Which is important and therefore, well, maybe it's one of those few occasions where some of the journalists in the US might take some lessons from what's going on.

22:28And move to digital. Yeah, who knows? Or at least take lessons from, as you say, the carriage of Pakistani journalists. Right, well, in the next part of the programme, we're going to be talking about the luxury goods market. It is taking a bit of a battering at the moment. We're going to find out why. Then when you come back on Business Matters.

23:03Welcome back to Business Matters with me, Roger Hearing, and my guest today, Alexander Kaufman and Memal Safras. Now, LVMH is one of the biggest names in the luxury goods sector. Think champagne, jewellery, handbags and much more. The French-based company is going through some pretty hard times. Net profits plummeted 22 % in the first half of 2025. LVMH blames what it calls an unsettled economic and geopolitical backdrop. But they are anticipating a good outcome soon from trade talks between the US and Europe. And that matters a lot. So what is the scale of the company's problem at the moment?

23:42I asked Pauline Brown. She's the former chair of LVMH North America and author of the book Aesthetic Intelligence. Two things. Number one, if you look at the top line before we look at the bottom line, it's continued to see erosion. The market was expecting that. It was actually a little more severe than the market expected, but close to in line. What was not close to in line is that there was a lot of spending, less deceleration than they've seen the prior quarter, but still deceleration. So what do I make of that? I make that they're using their resources to try to stem the bleeding, but that it is bleeding and the momentum is still moving in the wrong direction.

24:21And is that bleeding mainly from the whole tariff issue? No, no. If anything, I think that was a little bit of relief today with the US being a big market, an important market. You know, it looks like it'll be if things go through as planned at about 15 % level. So not as bad as was threatened, still more than anyone would like. And this is not a time in the luxury industry's health that they can take any amount of taxation above and beyond what they've been dealing with. But I would say the issues of the last quarter go much deeper and broader than any geopolitical issue. Okay, well, give us a sense of what those issues are.

25:01I mean, essentially, these are things that people buy to show off the wealth they have in good times. Is it the problem that they don't have that wealth in the way they did? Well, the aspirational customer, which is where a lot of growth has come over the last 10 years, does not have the wealth. You're right. But the more stable buyer, which is, call it the top 10%, in some cases, in some brands like Allura Piana, even the top 1 % of socioeconomic, their wealth is not terribly affected. In fact, In some cases, if they're in Silicon Valley, your wealth has never been better. So I don't think it's a wealth issue per se.

25:36I think it's a confidence issue. I also think it's a perceived value issue. So a lot of the luxury brands, not just LVMH's brands, during the sort of pandemic period, really into about two years ago, they took price up quite aggressively. And they did because the demand was strong. But they took it to a point where now even very wealthy customers are saying it is not worth spending 50 percent more on a bag that I could have gotten for a significantly lower amount just five years ago. But what about the tactics that are being used to deal with this? I know the leader of LVMH, the CEO, took, you know, opening a factory in Texas, pushing to create things in the US, which in terms of the tariff environment is certainly going to help.

26:24Is that a way forward? No. Number one, that is a helpful headline in certain tense political moments. The reality is that any U.S. production is still nominal for the company. And if you look at the actual performance of those U.S.-based manufacturing operations, they haven't delivered at the level that the company would hope for all sorts of reasons that extend beyond simply the economics. Yeah. Pauline Brown there, the former chair of LVMH North America. Alexander, I mean, you know, with our sympathy for those who can afford these kind of things might be quite, you know, the smallest violins might be playing.