The Fed's credibility depends on resisting politics, not playing it
At Jackson Hole last month, all eyes were on Federal Reserve Chair Kevin Warsh in his first speech at the Fed’s annual conference. But all thoughts were about the Fed’s rate decision next week. Kenneth Rogoff, a Harvard economist who was at Jackson Hole as a lunchtime speaker, offered this advice to a New York Times journalist: “If they can possibly put it off till after the midterms, it would be…
At the recent Federal Reserve's annual conference in Jackson Hole, attention was focused on the upcoming rate decision rather than Federal Reserve Chair Kevin Warsh's speech. Kenneth Rogoff, a Harvard economist, delivered a piece of advice to a New York Times journalist. He suggested that postponing the decision until after the midterms would be beneficial for the institution.
Rogoff questioned if preserving the Fed's independence by antagonizing President Trump is a better strategy than staying quiet and waiting until winter. However, Rogoff believed that attempting to maintain independence by engaging in politics is a poor approach for the Federal Reserve. The best explanation for this comes from Rogoff himself, who published a foundational paper in 1983 on central bank credibility.
In his stylized model, he demonstrated that on average, economic outcomes would be improved if the head of the central bank were to maintain independence.
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- The Fed's credibility depends on resisting politics, not playing it koreatimes.co.kr
