Kathleen Hays has been running a “Central Bank Central Fed Independence Project” series on her Substack. Parts 5 and 6 dropped on Aug. 5 and 6. Part 5 features Kathleen’s interview with Dr. Robert Eisenbeis, esteemed “Fed watcher” and a colleague and friend of several decades in his role as Vice-Chairman and Chief Monetary Economist for Cumberland Advisors. He has recently retired from Cumberland — but not from analyzing matters pertaining to the Fed.
In the interview, Bob points out that if Jay Powell serves out his term and is then replaced as chair, he might still remain on the Board of Governors. He goes on to explain that, if Powell does remain, he could be elected by his colleagues to be chair of the FOMC; and the new Federal Reserve Board chair appointed by Trump might not become FOMC chair for two years. The plot thickens!
Thus, if there are continued threats to the Fed’s independence, the Fed may have ways to defend itself; and Jay Powell could continue to be key to that effort. In fact, as Bob says, that could be Powell’s legacy to Fed independence: “He’d go down in history, probably for that more than for anything [else] in the entirety of his career.”
Bob and Kathleen also take a look at Trump’s call for Powell’s resignation over the Fed’s building remodel project. Bob makes the key point that it was the Federal Reserve Board, not Powell, that approved the project (after a review process that took place in 2019 and 2020 through governmental advisory boards and the District of Columbia), so that there are no grounds for removing Powell.
Thus, Kathleen and Bob conclude, Trump has little real leverage over the Fed or Chairman Powell. But, Kathleen asks, has this recent tussle damaged the Fed? Only, Bob replies, if the Fed caves to the politics.
Now, here’s the link to Kathleen’s interview with Bob Eisenbeis:
https://kathleenhays.substack.com/p/central-bank-central-fed-independence-ba3
Former Philadelphia Fed President Charles Plosser, another long-time friend, who has served since 2019 as a member of the Global Interdependence Center’s College of Central Bankers, follows Bob in Part 6 of the series, arguing that an independent Federal Reserve is more effective in achieving its dual mandate than a Fed influenced by politicians can be. Both interviews are highly recommended anchors of experience and sense amid developments and political agendas.
Here’s a link to Kathleen’s interview with Charles Plosser:
https://kathleenhays.substack.com/p/central-bank-central-fed-independence-a57
Both interviews are accompanied by partial transcripts. You will also have the options of subscribing, for free, to Kathleen’s excellent “Central Bank Central” Substack and viewing the rest of the series.
