Trump's Fed pick Judy Shelton questions need for independent central bank

Megan Henney

Judy Shelton, President Trump’s most recent pick for the Federal Reserve board, recently questioned why the U.S. central bank needs to operate free of political influence.

The conservative economist shared her view that policymakers at the Fed should work closely in line with the White House and Congress at an event in mid-October on the sidelines of the International Monetary Fund’s annual meetings.

“I don’t see any reference to independence in the legislation that has defined the role of the Federal Reserve for the United States,” Shelton said, according to Bloomberg, which first reported on her remarks.

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Her remarks go against a widely heralded belief on Wall Street and inside the Fed that the central bank needs to remain independent and free of short-term political pressure in order to make the best economic decisions and maintain the country’s trust.

But Shelton, during an interview conducted by Beat Siegenthaler, a senior adviser at UBS, continued to make her case, saying that if people were to read the law, “they would see that it demands that the Board of Governors of the Federal Reserve work hand-in-hand with Congress and the president to meet certain strategic economic goals for the U.S.”

In July, Trump announced that he was tapping Shelton and Christopher Waller, a long-time official at the St. Louis Federal Reserve, to fill two vacant spots on the Fed’s seven-member board. The White House has yet to officially nominate either candidate, but Shelton’s remarks could complicate her nomination process.

Trump’s previous four picks have backed out from the nomination process last week after failing to secure the necessary Senate votes when four Republicans broke with the president.

Last week, Trump met with Chairman Jerome Powell at the White House to discuss the economy, growth, employment and inflation, the Fed said in a statement. During the meeting, Trump said he “protested” the U.S. central bank’s interest rate policy, which he considers too high compared to other countries.

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Trump, who's made the U.S. economy the lynchpin of his 2020 re-election campaign, has repeatedly pressured Fed officials to lower the interbank lending rate closer in line with other central banks, including Japan and the European Union, which have slashed interest rates into negative territory.

The Fed's refusal to do so has angered the president, who frequently berates the Fed for raising interest rates too high, too quickly. He’s also threatened that he could fire Powell, or strip him of his chairmanship.

Powell, in most public speaking events this year, has stressed the importance of maintaining an independent Fed.

“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests,” Powell said in June. “Central banks in major democracies around the world have similar independence.”

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