As well as penning letters to hundreds of world leaders this week, the White House also found time to write to Fed chairman Jerome Powell, criticizing his leadership.
It reads: “The Board of Governors of the Federal Reserve System shall have power to levy semiannually upon the Federal reserve banks, in proportion to their capital stock and surplus, an assessment sufficient to pay its estimated expenses … its judgment alone shall be necessary for the purpose of providing suitable and adequate quarters for the performance of its functions.
“The Board may maintain, enlarge, or remodel any building or buildings so acquired or constructed and shall have sole control of such building or buildings and space therein.”
Even before President Trump and JD Vance won the presidential election, the duo were hinting they wanted more of a say in how the federally mandated independent Fed is run—and criticism of Powell has ramped up since then.
Prior to the election, Trump called Powell “political” and said a rate cut would prove the FOMC was attempting to aid the Biden administration.
The reasoning is clear: To achieve the Fed’s dual mandate of inflation at 2% and maximum employment, the interest rate level should be set by independent economists working for the long-term benefit of the American public, as opposed to the behest of whichever politician is in the White House.
The importance of Fed independence was reiterated yesterday by Alberto Musalem, president and CEO of the Federal Reserve, speaking prior to the letter sent from Vought to Powell.
In response to a question from Fortune during a roundtable with independent think tank OMFIF, Musalem explained: “If you look at empirical evidence across many countries and many years, so a lot of data, countries that have had more independent central banks have delivered better inflation and better employment outcomes for the people they serve, meaning lower and more stable inflation and higher and more stable employment.”
Musalem previously worked for the International Monetary Fund (IMF) as well as a number of private investment businesses.
He added: “I observed that empirical evidence to be true in my own career.”
“Countries with more independent central banks are able to control inflation expectations and keep them anchored better, and if they can keep inflation expectations anchored better, that means they can be more responsive to employment and activity when there are shocks to the economy,” President Musalem added. “It’s a good thing to be able to do that.”
President Musalem maintained the need for a board which was accountable and transparent to the public, saying: “We at the Fed have instrument[al] and operational independence, but the goals of maximum employment and price stability are set by Congress, and there’s accountability to Congress.”
