Getting public policy right isn’t easy.
(Disclosure—I helped design the survey on Fed autonomy mentioned in this article)
Next week America will choose a new president. According to one poll, 58% of bankers believe former U.S. President Donald Trump would be better for the financial sector vs. 35% who think the policies of Vice President Kamala Harris would be more beneficial.
The Fed is the nation’s leading independent agency. Because it does not rely on Congress and the White House for annual budget appropriations, it does not have to worry that its funding (which primarily comes from the interest earned on the securities it owns) will be cut off if it decides to raise interest rates. Furthermore, the leadership of the central bank (the governors and Fed Chair) are appointed for a term and cannot be removed from office by the President simply because of a policy disagreement.
While other agencies are legally established as “independent,” few have the level of autonomy the Fed does.
