Fed independence

Yellen defends Fed independence as Trump allies push plans for more control

Trump upended the tradition of presidents not weighing in on the Fed’s monetary policy decisions while he was in office, publicly attacking Fed officials and Chair Jerome Powell.

By MICHAEL STRATFORD

Treasury Secretary Janet Yellen is mounting a new defense of the Federal Reserve’s separation from politics as former President Donald Trump’s allies float plans to chip away at the central bank’s independence if he returns to the White House.

Yellen, a former Fed chair, will use a speech on Friday at the McCain Institute’s Sedona Forum to argue that an independent Fed and democracy are good for the economy.

“As Chair of the Federal Reserve, I insisted on the Fed’s independence and transparency because I believe it matters for financial stability and economic growth,” Yellen plans to say, according to excerpts released Wednesday by the Treasury Department. “Recent research has been consistent with my belief: It has shown that greater central bank independence is associated with greater price stability, which contributes significantly to long-term growth.” The excerpts of Yellen’s speech do not refer to Trump by name.

Trump upended the tradition of presidents not weighing in on the Fed’s monetary policy decisions while he was in office, publicly attacking Fed officials and Chair Jerome Powell, whom Trump appointed to the job. Trump accused Powell of hurting the economy by keeping interest rates too high, once suggesting he was an “enemy” of the country.

Now, allies of the presumptive GOP presidential nominee are contemplating ways to more formally erase the Fed’s independence and give the White House more power over the central bank, the Wall Street Journal reported last week.

Yellen served as Fed chair from 2014 to 2018, when Trump replaced her with Powell as head of the central bank.

Her speech in Arizona will also make the case that attacks on democracy, such as the Jan. 6 riot by a pro-Trump mob at the U.S. Capitol, undercut the nation’s economic prosperity.

“I admit that this doesn’t seem like typical terrain for a Treasury Secretary,” Yellen said in the prepared remarks. “But democracy isn’t just important in and of itself. I believe that democracy is critical to building and sustaining a strong economy.”

“Undercutting democracy undercuts a foundation of sustainable and inclusive growth,” she said. “Recently, democracy has come under threat. That challenge was especially terrifying on the notorious day of January 6th, when rioters, spurred on by a lie, stormed the Capitol.”