White House Touts Support for Fed Independence as Trump Advisers Eye Changes

Amara Omeokwe
·2 min read
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(Bloomberg) -- President Joe Biden’s administration emphasized its “unwavering support” for the independence of central banks, following heightened speculation over how Donald Trump could ramp up pressure on the Federal Reserve if he wins another term in the White House.

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In a blog post published Wednesday, White House economists cited research and historical data to make the case that central banks’ independence bolsters their credibility with the public, and in turn their ability to anchor inflation expectations and keep prices stable.

“We in the Biden administration are highly motivated by this history and will continue our unwavering support for central bank independence,” the White House Council of Economic Advisers said. “History could not be clearer regarding the lasting and damaging inflationary consequences of ignoring this lesson.”

The Fed ramped up interest rates in 2022 and 2023 in a bid to curb soaring inflation, and has held them at the highest level in more than two decades since July. While price growth has cooled substantially, progress has slowed this year and policymakers have said they’re likely to leave borrowing costs higher for longer than previously thought.

The Biden administration, which has grappled with voter backlash to high inflation, has previously said it respects the Fed’s independence. Still, Biden in April doubled down on an earlier prediction that the Fed will cut rates in 2024.

Meanwhile, Trump has said he would not reappoint Jerome Powell as Fed chair if he wins reelection this fall, and some informal advisers are floating possible reforms to the Fed that would give him more power over the central bank. Trump during his presidential term publicly criticized the Fed and Powell and pushed for the central bank to lower rates, though his campaign insists he hasn’t signed off on any new policy proposals.

Powell in recent months has repeatedly said the Fed makes its decisions based on what’s best for the economy, and refrains from involving itself in partisan politics.

“We just don’t go down that road,” he said at a May 1 press conference. “If you go down that road, where do you stop?”

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