“It is reasonable for a political movement to question the need for old institutions,” argues Senior Fellow Raghuram Rajan in an article at *Time*. But some institutions “are worth preserving,” Rajan says, and in his view “an independent Fed is one of them.” Rajan emphasizes that “the primary role of a modern central bank has shifted towards stabilizing the value of the domestic currency by keeping price increases, that is, inflation, at a low level: around 2% in the case of the Fed.” But since bringing down inflation usually requires the “painful” step of keeping “interest rates high so that consumers and firms borrow less and curtail their spending,” a political temptation exists “to let the economy run ‘hot’ and deal with rising inflation after the next election.” Rajan concludes that today, “it is in the best interest of all Americans that Trump let the Fed do its job” without political pressure or interference, so the US central bank can professionally manage monetary policy.
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“It is reasonable for a political movement to question the need for old institutions,” argues Senior Fellow Raghuram Rajan in an article at *Time*. But some institutions “are worth preserving,” Rajan says, and in his view “an independent Fed is one of them.” Rajan emphasizes that “the primary role of a modern central bank has shifted towards stabilizing the value of the domestic currency by keeping price increases, that is, inflation, at a low level: around 2% in the case of the Fed.” But since bringing down inflation usually requires the “painful” step of keeping “interest rates high so that consumers and firms borrow less and curtail their spending,” a political temptation exists “to let the economy run ‘hot’ and deal with rising inflation after the next election.” Rajan concludes that today, “it is in the best interest of all Americans that Trump let the Fed do its job” without political pressure or interference, so the US central bank can professionally manage monetary policy.