Fed chairman Jay Powell has found some powerful allies in his battle to keep the Federal Reserve’s monetary policy independent of political pressure.
Every living former US Federal Reserve chair has ganged up on US President Donald Trump in an op-ed with the Wall Street Journal.
Here’s the kicker:
Elections have consequences. That certainly applies to the Federal Reserve as well as to other government agencies. When the current chair’s four-year term ends, the president will have the opportunity to reappoint him or choose someone new. That nomination will have to be ratified by the Senate. We hope that when that decision is made, the choice will be based on the prospective nominee’s competence and integrity, not on political allegiance or activism. It is critical to preserve the Federal Reserve’s ability to make decisions based on the best interests of the nation, not the interests of a small group of politicians.
It’s the central banking equivalent of calling your older, tougher cousins in to the school playground when the school bully tries to take your lunch money. And Volcker, Greenspan, Yellen and Bernanke are quite a posse.
But will it work?
The Journal article is diplomatic, eloquent and reflective. Everything that Trump isn’t, then.
The trouble is, in an era of short attention spans and pick-A-side politics where the Fed chair finds himself regularly called out on Twitter, relying on things like evidence, or a coherent argument, might not cut it.
Tellingly, Trump hasn’t bothered (yet) to respond to the piece.
Earlier this year, when addressing Trump’s threat to replace Powell, former Fed vice-chair Stan Fischer put it bluntly. If the US President used his re-election in 2020 to choose a Fed chair with views close to his own, there was a chance of the US becoming “a Third World country”.
Stark and not exactly politically correct. If they are to retain their independence, though, the world’s central bankers might need a bit more of Fischer’s zing.