For months, Donald Trump has badgered the US Federal Reserve and its chair, Jerome Powell, to lower interest rates. When the governors of the Fed did so by 0.25 percentage points in mid-September to a target of between 4% and 4.25%, it wasn’t big or fast enough for Trump.
The next day, the president asked the US Supreme Court to rule on whether he could fire Lisa Cook, a Fed governor. A federal appeals court had blocked Trump from doing so after he accused her of mortgage fraud, which she denies.
This isn’t the first time a US president has put pressure on the Fed. In the early 1970s, Fed chair Arthur Burns came under sustained pressure from Richard Nixon to lower interest rates ahead of the 1972 presidential election. The Fed did lower rates and high inflation followed, fuelled by the headwinds of high global oil prices.
In this episode of The Conversation Weekly podcast, Cristina Bodea, professor of political science at Michigan State University, explains how the inflation spike of the 1970s cemented the case for protecting central banks from day-to-day politics. “There’s not a lot that becomes a global norm for good economic governance,” says Bodea, “but central bank independence became one.”
From the 1990s onwards, countries around the world began to pass laws protecting the independence of their central banks. Bodea’s research measures the independence of central banks by tracking these laws. Today, she says that independence is now under sustained pressure from a generation of populist leaders, which could threaten the credibility of central banks.
Listen to the conversation with Cristina Bodea on The Conversation Weekly podcast.
This episode of The Conversation Weekly was written and produced by Katie Flood, Mend Mariwany and Gemma Ware. Mixing and sound design by Michelle Macklem and theme music by Neeta Sarl.
Newsclips in this episode from WAVY TV 10, Reagan Library, euronews, msnbc, CBS News and NBC News.
Listen to The Conversation Weekly via any of the apps listed above, download it directly via our RSS feed or find out how else to listen here. A transcript of this episode is available on Apple Podcasts or Spotify.
Cristina Bodea does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
This article was originally published on The Conversation. Read the original article.
