Central Bank Independency

Nothing much to say about this really. I don't think I discussed it much here, but I'm certainly skeptical. I don't see why fiscal policy, which is discussed in congress and is an eminently political affair (budgets are negotiated between the executive and the parties in the legislative in most countries), should be different than monetary policy in this respect. But at any rate, the Lacker affair reveals how much the Fed is not independent from the financial sector, and that should be more troublesome than the lack of independence from the executive.

It's a bit of old news, but I've been thinking about it, both because of the new configuration of the Fed will have an impact on monetary policy, and also, since I'm teaching this course on central banking history. Btw, Jeffrey Lacker, passed confidential information to Medley Global Advisors, a research firm, and was essentially forced to resign. His successor, as per Fed rules, will be chosen by the board of directors, which are appointed by member banks. That is, the financial sector appoints the officials that are in charge of monetary policy, and of regulating them. Perhaps cronyism is in belt in the institutional structure of capitalism.

PS: Yes, Lacker was a hawk and for faster hikes in the Fed Fund rate.


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