Federal Reserve Chair Janet Yellen is “not doing political things,” contrary to what was screamed by a presidential candidate during the debate last night

Janet Yellen

Janet Yellen, 15th Chair of the Federal Reserve

At the presidential debate last night, Donald Trump accused Federal Reserve Chair Janet Yellen of “doing political things” by keeping interest rates low. Former Secretary of State and former U.S. Senator Hillary Clinton did not address the issue during the debate. Previously, she has stated that it is inappropriate for presidential candidates to comment on Federal Reserve Actions.

Since the Fed was founded in 1913, it has intended to be independent of the President and the Congress. For that reason the term of a Fed governors is 14 years, sufficiently long to last more than one president’s term in office. The President does nominate the Chair of the Board of Governors of the Fed, whose four-year term lasts beyond the end of the President’s term. In recent years, former President Ronald Reagan nominated Alan Greenspan to be chair of the Fed. Former presidents George H.W. Bush, Bill Clinton and George W. Bush, all renominated him. Then President George W. Bush nominated Ben Bernanke and President Barack Obama renominated him. These Fed chairs served under both Republican and Democrat presidents.

Janet Yellen took office as Fed chair on February 3, 2014, as one of the most qualified persons to hold the position, having served as a Fed Governor, Vice Chair of the Fed, and President of the Federal Reserve Bank of San Francisco.

The Fed makes its monetary policy decisions based on what is best for the economy. We can view the press conference that the Fed held after its most recent meeting (September 20-21) https://www.federalreserve. gov/monetarypolicy/ fomcpresconf20160921.htm and the projections on which the FOMC decisions were based. https://www.federalreserve. gov/monetarypolicy/ fomcprojtabl20160921.htm

Yes, the economy is improving, but inflation is still below the target of 2%. Hence the appropriate stance for the Fed to make was to “stand pat.”

We may see the Fed raise its target for the Federal funds rate (rate that banks charge each other for overnight loans) in December or in early 2017. But the Fed will continue to be independent and make its decisions based on the economy, economic projections of the economy going forward and its dual mandates of maximum employment and price stability. https://www.federalreserve. gov/newsevents/press/monetary/ 20160921a.htm

You may also like...