Against Central Bank Independence

Central banks should be apolitical, not unaccountable. Monetary technocrats should serve the People.

AP/J. Scott Applewhite, file
The Federal Reserve at Washington in 2020. AP/J. Scott Applewhite, file

President Trump’s return to the White House has sparked a resurgence of interest in central bank independence. One Federal Reserve governor, Michael Barr, said he would step down from his Vice Chairman position earlier this month, avoiding a direct conflict with the administration that could have triggered his demotion or firing — and a lengthy court battle on the legality of such an action. Mr. Trump has intimated he wants to replace the Fed chairman, Jerome Powell, and has explicitly stated his desire for lower interest rates, as well. 

Many economists have cried foul. They worry Mr. Trump will politicize monetary policy, removing the wall of separation between central banking and hardball politics. Subjecting Fed policymakers to the whims of politicians on short-term election cycles, they say, would result in higher inflation and greater financial instability.

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