Federal Reserve Chairman Jerome Powell announced interest rates would remain on hold during a press conference last month at the Federal Reserve Bank of America’s William McChesney Martinbuilding in Washington, D.C. (Photo by Kevin Dietsch/Getty Images)
WASHINGTON (AP) — As Donald Trump, who has frequently attacked the Federal Reserve’s policy decisions in the past, moves closer to formally becoming the Republican presidential nominee, the central bank is emphasizing the importance of its political independence.
On Friday, the Fed released its twice-yearly report on interest rate policy, a typically tedious document that primarily contains analysis of job growth, inflation, interest rates and other economic trends. The report also contains short text boxes that often focus on technical issues, such as monetary policy rules.
The report is typically released on the Friday before the Fed chairman testifies before House and Senate committees as part of the Fed’s semi-annual report.
Many of these boxes appear regularly in most reports, including those focusing on employment and income for different demographic groups. But Friday’s report included a new one, “Monetary Policy Independence, Transparency, and Accountability,” in which the Fed stressed the critical importance of operating independent of political pressure.
“The principles underlying independent monetary policy are widely supported,” the report said. “Operational independence for monetary policy has become the international norm, and economic research shows that economic performance tends to improve when central banks have such independence.”
The comments suggest the Fed is seeking to shore up support in Congress for its independence, which Fed Chairman Jerome Powell cited earlier this week as a key bulwark against political attacks on the central bank.
A Fed spokesman declined to comment on the addition of the text box.
“I believe there is very strong support for Fed independence in Congress, across both parties,” Powell said Tuesday at a monetary policy conference in Portugal.
Before the pandemic hit in 2020, Trump had repeatedly called on the Fed to lower its benchmark interest rate, which would have reduced borrowing costs for consumers and businesses and stimulated the economy.
In 2018, as the Fed gradually raised interest rates from ultra-low levels set after the Great Recession, Trump, in a highly unusual attack for a sitting president, called the central bank “my biggest threat.”
And he said of Powell, “I’m not happy with what he’s doing.”
Trump initially nominated Powell to be Fed chair, then President Joe Biden reappointed him for a term ending in May 2026. Trump has already indicated he would not reappoint Powell if he is re-elected.
Asked Tuesday about possible threats to the Fed’s independence if Trump is re-elected, Powell said, “I’m not looking at that at all.”
“I really think we just need to keep doing our job,” Powell continued. “The U.S. economy is at 4 percent unemployment, 2 percent growth, 2.6 percent inflation. Let’s keep going. Let’s keep doing our job. History will tell.”
