Fed Should Ignore Electoral Calendars, Focus on Economy

The US Federal Reserve is facing increasing pressure from President Donald Trump's attacks on its independence. In response, some experts are advising the Fed to delay key decisions until after the midterm elections in November.

However, Kenneth Rogoff, a Harvard economist and former Fed official, argues that playing politics to preserve independence is a terrible strategy for the central bank.

Rogoff's 1983 model showed that economic outcomes would be better if the head of the central bank were more averse to inflation than the average person. He believes this credibility would lower expected and actual inflation.

Despite Rogoff's advice, others argue that the Fed should not cave to politics and instead rely on its legislative protections. The US Congress built the Fed precisely for moments of political pressure, and caving now would undercut its own case for independence.