Why the Federal Reserve has historically been independent of the White House

Core Viewpoint - The Justice Department has threatened the Federal Reserve with a criminal indictment over Fed Chair Jerome Powell's testimony regarding building renovations, marking a significant escalation in the administration's attempts to exert control over the independent institution [1]. Group 1: Federal Reserve's Independence - The independence of the U.S. Federal Reserve is crucial as it wields extensive power over the economy, influencing borrowing costs and economic growth through interest rate adjustments [5]. - Economists favor independent central banks because they can take unpopular measures, such as raising interest rates to combat inflation, without political pressure [6]. - The importance of an independent Fed was solidified after the inflation spike of the 1970s and 1980s, where political pressure led to detrimental economic consequences [7]. Group 2: Political Pressure and Reactions - President Trump has repeatedly criticized Powell for not cutting short-term interest rates and has threatened to fire him, reflecting ongoing tensions between the administration and the Fed [2]. - Trump has accused Powell of mismanaging a $2.5 billion building renovation project, which Powell described as a "pretext" to undermine the Fed's independence [3]. - There is a growing concern among some lawmakers, such as Senator Thom Tillis, regarding the administration's efforts to diminish the Fed's independence [4].