WASHINGTON – The Federal Reserve is underscoring the importance of its political independence at a time when Donald Trump, who has frequently attacked the Fed’s policymaking in the past, is closer to formally becoming the Republican nominee for president.
On Friday, the Fed released its semiannual report on its interest rate policies, a typically dry document that mainly includes its analysis of job growth, inflation, interest rates and other economic trends. The report includes small text boxes that focus on often technical issues, such as monetary policy rules.
The report is typically released on Friday, before the Fed chairman testifies before House and Senate committees, as part of the central bank’s semiannual report to Congress.
Many of the boxes appear regularly in most reports, such as the one that focuses on employment and earnings for different demographic groups. Friday’s report, however, includes a new box titled “Independence, Transparency and Accountability of Monetary Policy.” That’s when the Fed underscored the vital need to operate independently of political pressures.
“There is broad support for the principles underlying independent monetary policy,” the report states. “Operational independence of monetary policy has become an international norm and economic research indicates that economic performance tends to be better when central banks have this independence.”
Such statements suggest the Fed is trying to bolster congressional support for its independence, which Chairman Jerome Powell cited earlier this week as a crucial bulwark against political attacks on the Fed.
A Fed spokesperson declined to comment on the inclusion of the text box.
“I think support for Fed 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 hit in 2020, Trump, as president, repeatedly tormented the Fed lowers its benchmark interest rate, which could reduce the cost of borrowing for consumers and businesses and stimulate the economy.
In 2018, as the Fed gradually raised its benchmark rate from the ultra-low levels that had been established after the Great Recession, Trump, in a highly unusual attack from a sitting president, called the central bank “my biggest threat.”
And he said, of Powell, “I’m not happy with what he’s doing.”
Trump originally nominated Powell as Fed chairman, and President Joe Biden later reappointed him for a term ending in May 2026. Trump has already indicated that would not renominate Powell if he is elected president again.
Powell, when asked Tuesday about the potential threat he poses to the Fed’s independence if Trump is elected again, said, “I’m not focused on that at all.”
“I really think we continue to do our jobs,” Powell continued. “I mean, the US economy – we have 4% unemployment, is growing 2%. Inflation by 2.6%. Let’s continue like this. Let’s do our work. History will judge.”
