The Federal Reserve’s independence and the public’s perception of that independence are critical for U.S. economic performance, a group of former Treasury secretaries and Fed chairs, including Ben Bernanke and Alan Greenspan, said in a joint statement.
Current Fed Chairman Jerome Powell announced yesterday that the Department of Justice has launched an investigation into his testimony before Congress about cost overruns of renovations at the Fed’s headquarters in D.C. Powell said the administration is targeting the Fed’s independence because President Trump is unhappy that the central bank has not lowered interest rates at a faster pace.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions — or whether instead monetary policy will be directed by political pressure or intimidation,” Powell said.
President Trump told NBC News on Sunday that he knew nothing about the DOJ investigation.
In their statement, the former Fed chairs said the DOJ investigation is “an unprecedented attempt to use prosecutorial attacks to undermine [Fed] independence.” They warned of negative consequences for the U.S. economy should the Fed lose that independence.
“This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly,” they said. “It has no place in the United States, whose greatest strength is the rule of law, which is at the foundation of our economic success.”
