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Analysis: Independence of the Federal Reserve under threat, silence from business community raises concerns
Summary: Amid reports that the Trump administration has launched a judicial investigation into Federal Reserve Chairman Powell, the independence of the Federal Reserve is facing a serious challenge. However, despite the traditional consensus that central bank independence is the cornerstone of developed economies, the US business community has remained unusually quiet. It has been revealed that ...
Amid reports that the Trump administration has launched a judicial investigation into Federal Reserve Chairman Powell, the independence of the Federal Reserve is facing a serious challenge. However, despite the traditional consensus that central bank independence is the cornerstone of developed economies, the US business community has remained unusually quiet.
It has been revealed that the US Department of Justice has issued a criminal investigation subpoena to Powell regarding the renovation costs of the Federal Reserve headquarters. Powell responded unusually firmly, stating that the investigation is not about testimony or the project itself, but rather because the Federal Reserve did not cater to the president's preferences on interest rate policy, posing a threat to the central bank's independent decision-making.
Although this event briefly caused market fluctuations, large corporations, industry organizations, and CEOs have almost collectively remained silent in public. Jeffrey Sonnenfeld, founder of the Yale CEO Leadership Institute, pointed out that private surveys show that 71% of CEOs believe the Trump administration is eroding the independence of the Federal Reserve, 80% believe that pressure to cut rates is not in the overall interest of the United States, but they are generally concerned that speaking out publicly will result in political retaliation.
Analysis suggests that behind the silence of the business community are both concerns about actual retaliation and a reliance on and speculative psychology in a low interest rate environment. Some corporate executives choose to influence policy through private communication, while others are betting that Trump will ultimately back down in confrontational behavior (TACO).
Some scholars point out that the market's vigilance against political interference in central banks is decreasing, with some in the business community and on Wall Street even agreeing with Trump's intuitive judgment. This attitude may indicate that US monetary policy is entering a new stage with more political implications.
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