The Fed Needs to Start Playing a Smarter Political Game
The central bank should rethink its notion of independence and how it relates to politics.
The Fed’s independence is under attack.
Photographer: Brendan Smialowski/AFP/Getty Images
There is a direct line between the U.S. Federal Reserve’s December interest-rate increase and last week’s announcement that Stephen Moore is set to be nominated to an open seat on the central bank’s Board of Governors. The Fed needs to start playing a smarter political game sooner rather than later. The risk to its independence has probably never been higher.
The speed at which the Fed has reversed direction from December suggests policy makers realize a mistake was made three months ago. They could have taken a cue from financial markets and the persistently low inflation environment to take a pass at that meeting. The next meeting was just six weeks away and was “live” in the sense that a press conference was already scheduled.