This is song When I saw the Wall Street Journal headline, I thought, Trump allies hatch plan to weaken Fed's independence:
Several people who have spoken with Trump about the Fed said he appeared to want someone in charge of the agency, effectively treating the president as an ex-officio member of the Fed's rate-setting committee. Under this approach, the chairman would regularly solicit Trump's views on interest rate policy and then negotiate with the committee to guide policy on the president's behalf. Some of the former president's advisers have discussed asking Fed chairman candidates to privately agree to consult with Trump informally on the Fed's decision, people familiar with the matter said. Others believe Trump himself could serve on the Fed's board of governors on an acting basis, an option some people close to the former president say is far-fetched.
Then we don't have to worry r*, potential GDP, PCE and CPI, etc. . For example, we just need Larry Kudlow or Steven Moore as Fed governors. And, more importantly, we don’t need to waste precious time estimating the Fed’s degree of independence.For example, here's a map of Central Banishment Independence (CBPI) in 2024, according to the data Romeli(2024).
source: Romeli(2024). Higher values (dark blue) indicate greater central bank independence.
But with Trump enacting reforms, we can be like… Vietnam!
source: Romeli(2024), the US CBI is set to the Vietnam value. Higher values (dark blue) indicate greater central bank independence.
Carola Binder's Central Bank Stress Index (discussed here postal) shows that the Fed faced pressure to loosen monetary policy in 2018Q4 (the data extends to 2019Q1, so we don’t know what Mr. Trump did in 2019Q2-Q4). In Mr. Trump's second term, it's easy to figure out what the Fed will do…
