Why presidents should keep their hands off the Fed

ON SATURDAY, Kamala Harris was asked to respond to Donald Trump’s suggestion that the president should have a say in the Federal Reserve’s interest rate decisions. She was vehemently opposed, saying, “The Fed is an independent entity, and as president, I would never interfere in the decisions that the Fed makes.”

Fed independence isn’t an issue that resonates with voters; most people probably don’t even understand the distinction between monetary and fiscal policy. But the likelihood that Trump, if he wins, will politicise the Fed looms large in the minds of those who analyse such things. It’s one reason economists surveyed by The Wall Street Journal in July said that inflation would be higher under a second Trump term than under Biden, a conclusion that presumably would carry over to Harris.

But why should the Fed be independent? The Federal Reserve’s legal status is complicated, but there’s no fundamental constitutional principle saying that elected officials must keep their hands off the money supply. Historically, central banks like the Fed have often been treated like ordinary government agencies, and not only under autocratic regimes. For example, the Bank of England was effectively just part of Britain’s Treasury Department until 1997, when it was given operational independence.