While the Fed’s core duties remain off-limits to Trump’s regulatory overhaul, the administration clearly wants to subordinate the central bank to its political objectives.
by Alexander W. Salter
The Daily Economy
President Trump is bringing federal agencies to heel. Is the Federal Reserve next?
Our nation’s central bank jealously guards its independence from politics. Given its inflation-fighting and financial stability-preserving mandates, that might seem like a good thing. You don’t need a PhD in economics to see how political meddling in monetary policy or bank regulation could create economic chaos.
Yet Fed independence has been greatly overstated. Congress sets the Fed’s goals: it has tasked the Fed with delivering maximum employment and stable prices. Top Fed policymakers are selected by the president and approved by the Senate. Constitutionally, the Fed can’t be separated from politics. Elected officials have the last word. Our only choice is whether that authority is exercised responsibly.