The Fed Tries to Steer Clear of Politics, but an Election Year Is Making It Tough – The New York Times
Federal Reserve officials are fiercely protective of their separation from politics, but the presidential election is putting the institution on a crash course with partisan wrangling. Fed officials set policy independently of the White House, meaning that while presidents can push for lower interest rates, they cannot force central bankers to cut borrowing costs. Congress oversees the Fed, but it, too, lacks power to directly influence rate decisions. There’s a reason
for that separation. Incumbent politicians generally want low interest rates, which help to stoke economic growth by making borrowing cheap. But the Fed uses higher interest rates to keep inflation slow and steady — and if politicians forced to keep rates low and goose the economy all the time, it could allow those price increases to rocket out of control. In light of the Fed’s independence, presidents have largely avoided talking about central bank policy at all ever since the early 1990s. Pressuring officials for lower rates was unlikely to help, administrations reasoned, and could backfire by prodding policymakers to keep rates higher for longer to prove that they were independent from the White House.