WASHINGTON — The Federal Reserve is stressing the importance of its political independence as Donald Trump, a frequent critic of the Fed’s policies in the past, inches closer to officially becoming the Republican presidential nominee again.
On Friday, the Fed released its half-yearly report on its interest rate policy, a typically dry document that largely covers 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 before House and Senate committees as part of the central bank’s semiannual report to Congress.
Many of the boxes appear regularly in each report, such as one that focuses on employment and income for various demographic groups. However, Friday’s report includes a new box titled “Monetary Policy Independence, Transparency and Accountability.” In it, the Fed stressed the vital need to operate independently of political pressures.
“There is broad support for the principles underlying independent monetary policy,” the report said. “Operational independence of monetary policy has become an international norm, and economic research suggests that economic performance tends to be better when central banks have such independence.”
Such statements suggest the Fed is seeking to shore up support for its independence on Capitol Hill, which Chairman Jerome Powell earlier this week called a crucial bulwark against political attacks on the Fed.
Before the pandemic struck in 2020, Trump repeatedly pushed the Fed to cut its key interest rate as president, a move that could lower borrowing costs for consumers and businesses and boost the economy.
In 2018, as the Fed gradually raised its benchmark interest rate from the ultra-low levels set after the Great Recession, Trump, in a highly unusual move by a sitting president, the central bank called “my biggest threat.”
And he said of Powell, “I’m not happy with what he’s doing.”
Trump had nominated Powell to be Fed chairman, and President Joe Biden later renominated him for a term that expires in May 2026.