Finance professor says the Fed must be separate from politics
The Federal Reserve building in Washington D.C.
Karen Bleier/AFP via Getty Images
A former head of a Federal Reserve Bank says the Fed’s independence from politics is “one of the foundational elements of a well-run economy.”
“The benefits of independence stem from the fact that the Fed and monetary policy affects the economy with a lag. And so you want to insulate it from short-run political considerations,” Loretta Mester, former president of the Federal Reserve Bank of Cleveland, told Morning Edition.
President Trump has floated the idea of firing Federal Reserve Chair Jerome Powell, who he’s expressed frustration with for months for not lowering interest rates. Trump says Powell’s refusal to lower the rates is hurting the economy.
The Fed has been wary of lowering interest rates as it assesses the impact of Trump’s tariffs on inflation. Consumer prices are up 2.7% compared to a year ago, which is a larger annual increase than the month before.
If Trump were to fire Powell, that could undermine the Federal Reserve’s independence.
Powell has said previously that Trump cannot lawfully fire him before his term ends in May 2026.
The following interview has been edited for length and clarity.
Interview Highlights
The digital piece was edited by Lisa Thomson.