The Federal Reserve is underscoring the importance of its political independence at a time when Donald Trump, who has incessantly attacked Fed policies previously, is on the verge of officially becoming the Republican presidential nominee.
On Friday, the Fed released its semi-annual report on its rate of interest policy, a typically dry document that primarily incorporates evaluation of job growth, inflation, rates of interest and other economic trends. The report incorporates short text boxes that concentrate on often technical issues akin to the principles of monetary policy.
The report is often released the Friday before the Fed chairman testifies before House and Senate committees as a part of the central bank’s semi-annual report back to Congress.
Many of those boxes appear often in most reports, akin to one which focuses on employment and income for various demographic groups. But Friday’s report features a recent box titled “Monetary Policy Independence, Transparency and Accountability.” In that box, the Fed emphasizes the importance of acting independently of political pressure.
“There is broad support for the principles of independent monetary policy,” the report says. “Operational independence of monetary policy has become an international norm, and economic research shows that economic performance tends to be better when central banks have such independence.”
Such statements suggest that the Fed is trying to achieve support in Congress for its independence, which Chairman Jerome Powell described earlier this week as a vital bulwark against political attacks on the Fed.
A Fed spokesman declined to comment on the inclusion of the text box.
“I think that where it really matters on Capitol Hill, support for Fed independence is very high in both political parties,” Powell said Tuesday during a monetary policy conference in Portugal.
Before the pandemic broke out in 2020, Trump was president repeatedly harassed The Fed should lower its benchmark rate of interest, which could lower the price of borrowing for consumers and businesses and stimulate the economy.
In 2018, because the Fed steadily raised its benchmark rate of interest from the ultra-low levels introduced after the Great Recession, Trump, in a highly unusual attack from a sitting president, attacked: called the central bank “my greatest threat.”
And about Powell he said: “I am not happy with what he is doing.”
Trump originally nominated Powell as Fed chair, and President Joe Biden later renominated him for a term ending in May 2026. Trump has already indicated that he wouldn’t nominate Powell again if he’s re-elected president.
When asked on Tuesday concerning the potential threat to the Fed’s independence within the event of Trump’s re-election, Powell said: “I’m not focused on that at all.”
“I really think we’re just going to keep doing our job,” Powell continued. “I mean, the U.S. economy – we now have 4% unemploymentit grows by 2%. Inflation at 2.6%. Let us carry on like this. Let us do our work. History will judge.”
