Republican vice presidential nominee JD Vance said
Vance's comments came during an interview with CNN on Sunday. They bolster remarks made by former President Donald Trump only days earlier, who said during a wide-ranging press conference that he would like "at least a say" about the Federal Reserve's benchmark interest rate.
Vance — a current member of the Senate Banking Committee — did not elaborate on how the president would go about influencing monetary policy, but he acknowledged that allowing for executive input would amount to a "huge change" for the Fed.
"President Trump is saying, I think, something that's really important and actually profound, which is that the political leadership of this country should have more say over the monetary policy of this country," he said. "I agree with him. That should fundamentally be a political decision."
Trump has been a frequent critic of the central bank. In 2018, he opposed the Fed's efforts to lift interest rates off their lower bound and
Trump's proposition threatens to undermine the concept of Fed independence as it has broadly been understood for decades, as a technocratic institution insulated from political whims. But policy experts note that this approach to central banking is rooted in a set of agreed upon best practices rather than an immutable right.
"If you dig into what is actually keeping this arrangement working, it's not the law, it's the fact that it's a tradition that has been carried along and worked very well," said Derek Tang, co-founder of Monetary Policy Analytics. "If you dig into how it actually works in practice, it's through the discipline of different actors in the financial policy system not to disturb the equilibrium."
Powell, who has repeatedly defended the value of the Fed's independence in recent months, has also noted that this approach to central banking is not ironclad.
"It's an institutional arrangement that serves the public well," Powell said during testimony in front of the Senate Banking Committee in July. "We just want to stress, as we do periodically, that this is an institutional choice we make as a country and as long as it's seen to serve the public well, it's a good choice."
While Trump has complained about the Fed's monetary policy decisions for a long time, for a president to have a literal vote on monetary policy — either directly or by proxy through a cabinet-level appointment to the Federal Open Market Committee — would take an act of Congress, said Andrew Levin, an economics professor at Dartmouth University and a former longtime staffer for the Fed Board of Governors.
Levin notes that the Banking Act of 1935 created the FOMC as it is structured today, with its mix of presidentially-appointed and Senate-approved governors and reserve bank presidents. That law also removed officials such as the Treasury secretary and comptroller of the currency from the Federal Reserve Board. Short of undoing that law, Levin said a president could try to stack the Board of Governors with allies, but he said the staggered 14-year terms of board members would make this difficult.
"Other members of the Federal Reserve Board would not allow that to happen," Levin said. "These people have a constitutional duty to uphold."
But other policy experts note that presidents continued to exert significant influence over monetary policy after the Banking Act of 1935 and,
Matt Stoller, chief researcher at the American Economic Liberties Project and a former congressional staffer, said the White House has exerted influence over the Fed to a greater or lesser extent over the course of the 20th century. The current hands-off arrangement arrived with the confirmation of Paul Volcker as Fed chair in 1979 and his vaunted campaign to tame inflation in the 1980s, after which markets came to trust the Fed's monetary policy acumen more than that of politicians.
Stoller noted that the Fed is already responsive to politician pressures, noting that the central bank cut rates in 2019 after Trump called for it to reverse course. At the time, Powell said the move was made in response to weakening economic conditions and politics played no role, but Stoller said since that episode, elected officials have shown a renewed willingness to push against the Fed.
"People are getting used to just saying, 'No, the Fed needs to do X,Y and Z,' and that's a good thing," he said. "It's not going to be that long before they start saying, 'Oh, it's a creature of Congress, right? We can push it. We can just legislate.'"
