September 18, 2024
I hear it all the time. The Federal Reserve is cutting interest rates because of the election.
Before I tell you why that isn’t accurate… here’s what the fed chairman said about that today.
“We do our work to serve all Americans we aren’t serving any politician.”
I have reported this for years – but I guess some people can’t wrap their head around the idea. So I’ll say it again. While the Federal Reserve is part of the United States government…it is an independent body. The Federal Reserve does not answer to the president and does not answer to the Congress. All decisions about monetary policy are made by the Federal Reserve and do not have to be approved by anyone. The Federal Reserve is the US central bank, created by the Federal Reserve Act of 1913 to establish a monetary system that could respond effectively to stresses in the banking system.
Now – it is true the Federal Reserve chairman and the committee that makes these decisions are appointed by the president and confirmed by the senate. But their term is for 14 years. So they sit through multiple presidents. For the record this current Federal Reserve chairman was selected by former President Trump when he was in office.
That 1913 law lays out a system and presidents are not supposed to be interfering in the federal reserve’s business and are not supposed to be even putting pressure on members of the fed when it comes to monetary policy.
But – I’m sure you’ve heard former president trump on the campaign trail recently say that this current system is not working and presidents should have more control over the Fed and what it does.
Chairman Powell – again – appointed by Trump – today said that’s a really really bad idea.
