Lattice Work

We read the headlines, too. That a public official, especially one raised in the real estate business, does not like increases in interest rates is not shocking. Vigor to spending, support to equity prices, and suppressed borrowing costs all look good to a politician eyeing an upcoming election, despite potential longer-term costs associated with excessive policy stimulus. Because a US election is always coming, monetary policy has been delegated to an independent agency, the Federal Reserve (Fed), to balance near-term benefits and longer-run costs. Independence does not rule out, however, a public discussion about public policy by public officials. It is awkward when that criticism contains more than a touch of self-interest. Post Volcker and Greenspan, the Fed’s ramparts of independence remain high, so the only question is how it influences central bankers’ internal decision-making, not whether decisions will be forced upon them.