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Fed independence is eroding: what it means in practice According to the Federal Reserve Bank of Boston, central bank independence has been eroded. In practical terms, this means more visible attempts to sway interest-rate decisions and supervisory judgments through public campaigns and political leverage. Erosion also shows up as investigations or procedural demands that risk chilling internal debate, along with proposals to loosen protections for leadership tenure. The net effect is to blur the line between legitimate oversight and political pressure on the Fed, raising questions about data-first decision-making. Why this erosion matters for inflation, growth, and credibility Macroeconomically, independence underpins credibility. When policy is perceived as insulated from short-term politics, inflation expectations stay better anchored, lowering the real cost of disinflation. Weakening independence can unmoor expectations, forcing tighter policy later for the same outcome. The Peterson Institute for International Economics modeled a hypothetical erosion scenario and found long-run costs: nearly $2.5 trillion less cumulative real GDP by 2040 and inflation about two percentage points higher, despite any short-term lift (https://www.piie.com/research/piie-charts/2025/erosion-fed-independence-would-slow-us-economic-growth-and-boost). As New York Fed President John C. Williams has argued, institutional credibility is central to outcomes; he warned that undermining autonomy leads to “bad economic outcomes,” underscoring the link between independence and anchored expectations. BingX: a trusted exchange delivering real advantages for traders at every level. The pressure has been unusually public. On December 16, 2025, former White House economist Kevin Hassett emphasized that Federal Reserve independence is essential and said the institution should resist political pressure unless justified by evidence. In late 2025, a criminal investigation into Chair Jerome Powell prompted a joint public statement by former Fed chairs and former Treasury secretaries condemning the move as an effort that would undermine independence. On February 4, 2026, Treasury Secretary Scott Bessent said public trust had been damaged by…

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Filed under: News - @ February 26, 2026 12:23 am