Thursday, 2 November 2017

How important is the chair of the US Fed?



In the US, the central bank is independent from the US government; however, just like the supreme court, the chair of the US Fed is named by the President, so the US government definitely has some influence over the central bank. Of course, though the US government cannot directly ask the US Fed to make certain monetary policies, the US government could send signals to the market about their wanted monetary policies or at least future policy directions. The naming of the nominee for the chair of the US Fed is a great tool to send signals to the market. The candidates for the chair of the US Fed are usually well respected in the financial sector; however, they hold different opinions about the future monetary policy decisions, some of them may love to loosen the policy and focus more on the economic growth, and some could focus more on limiting the inflation in the economy. Based on the candidates’ different opinions about the future monetary policy, the US president could name the one whose opinion matches the best; therefore, the policy opinion of the nominee pointed by the President also represents the opinion of the White House. Of course, once the nominee officially becomes the chair, he or she could adjust the policy plan, but the main direction of the future monetary policy is very likely to stay the same, because unlike a supreme court judge, the chair of the US Fed has a term, they are less likely to be fully neutral and independent.
In general, the chair of the US Fed can smoothly finish his or her job in his or her term, as he or she also present the opinion from the US government.

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