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Federal Reserve Governor Adriana Kugler says maintaining the American central bank’s independent existence is crucial, warning that interference from the government would lead to adverse consequences.
She said that central bank policies “significantly influence prices, interest rates, employment, and income in the economy.” Policies that promote employment growth and economic activity put upward pressure on inflation. In contrast, policies to lower inflation tend to slow down economic activity and employment growth.
Kugler contrasted the difference in priorities between an independent central bank and an elected government which oversees national policy for a period of four to eight years.
“An elected government may be naturally focused on the short-term goals of its constituents and may have an incentive to try to lower the unemployment rate in the short run, with less concern about the longer-term effects on inflation and growth,” she said.
“This incentive may generate undesirable economic cycles, potentially destabilizing prices.” Delegating monetary policy to an independent entity like the central bank is a solution to avoid such situations, the Fed governor said.
When asked whether the president has the authority to intervene in central bank issues by firing or demoting him, Powell said such actions are “not permitted under the law.”
In 2019, Trump was critical of how Powell handled interest rates. At the time, the president wanted the central bank to bring down the Fed’s benchmark interest rates to zero.
None of the current Fed governors have a term that ends before 2026. As such, making changes to these posts prior to their expiry would likely raise “complicated legal questions.”
“Powell didn’t mention, however, that The Federal Reserve is unconstitutional to begin with. No power was ever granted to the federal government to create a monopoly bank that manipulates interest rates and counterfeits money,” he wrote.
“So the big issue is not who has more authority over the other; the president or the Fed chairman. The issue is that the Federal Reserve should not exist at all!”