The Federal Reserve is highlighting the importance of its political independence at a time when Donald Trump, who frequently attacked the Fed’s policymaking in the past, edges closer to formally becoming the Republican nominee for president.
On Friday, the Fed released its twice-yearly report on its interest-rate policies, a typically dry document that primarily includes its analysis of job growth, inflation, interest rates and other economic trends. The report includes short text boxes that focus on often-technical issues such as monetary policy rules.
The report is typically released the Friday before the Fed chair testifies to House and Senate committees as part of the central bank’s semi-annual report to Congress.
Many of the boxes appear regularly in most reports, like one that focuses on employment and earnings for different demographic groups. Friday’s report, however, includes a new box titled, “Monetary policy independence, transparency, and accountability.” It is there that the Fed stressed the vital need for it to operate independent of political pressures.
“There is broad support for the principles underlying independent monetary policy,” the report says. “Operational independence of monetary policy has become an international norm, and economic research indicates that economic performance has tended to be better when central banks have such independence.”
Such statements suggest that the Fed is seeking to shore up support in Congress for its independence, which Chair Jerome Powell earlier this week mentioned as a crucial bulwark against political attacks on the Fed.
A spokesperson for the Fed declined to comment on the inclusion of the text box.
“I do think support for the Fed’s independence is very high, where it really matters on Capitol Hill, in both political parties,” Powell said Tuesday during a monetary policy conference in Portugal.
Before the pandemic struck in 2020, Trump, as president, repeatedly badgered the Fed to lower its benchmark interest rate, which can reduce the cost of consumer and business borrowing and stimulate the economy.
In 2018, as the Fed gradually raised its benchmark rate from ultra-low levels that had been put in place after the Great Recession, Trump, in a highly unusual attack from a sitting president, called the central bank “my biggest threat.”
And he said, regarding Powell, “I’m not happy with what he’s doing.”
Trump originally nominated Powell as Fed chair, and President Joe Biden later re-nominated him to a term that will end in May 2026. Trump has already indicated that he wouldn’t renominate Powell if he is elected president again.
Powell, when asked Tuesday about the potential threat posed to the Fed’s independence should Trump be elected again, said, “I am not focused on that at all.”
“I really think that we just keep doing our jobs,” Powell continued. “I mean, the U.S. Economy — we have 4% unemployment, it’s growing at 2%. Inflation’s at 2.6%. Let’s keep that going. Let’s do our jobs. History will judge.”