While monetary policy can influence interest rates, employment, exchange rates, and economic growth, we believe its most fundamental role is managing inflation. To paraphrase Milton Friedman, inflation is always and everywhere a monetary phenomenon. In this view, the responsibility for inflation lies squarely with the central bank, which in the U.S. is the Federal Reserve. 

Maintaining low and stable inflation should be the Fed’s primary mission. While there are legitimate debates about the broader effects of monetary policy, those debates must be honest, rigorous, and part of the public discourse. Criticism of the Fed is fair game. But recent threats from the White House to fire or pressure Fed Chair Jerome Powell to resign cross a dangerous line. Such actions undermine the Fed’s credibility and, by extension, the stability of the U.S. economy. 

We haven’t agreed with every decision Powell has made. But the idea of removing him over exaggerated claims, such as overspending on Fed buildings, is reckless. The President used trumped-up (pun intended) charges of overspending at the Fed building to justify pressuring Powell to resign or even to fire him. Using charges of real estate mismanagement to undercut your rivals should not be used by either party. President Trump rightly complained about Democrats’ attempts to undermine his re-election by accusing, charging, and convicting him of real estate fraud. He shouldn’t make similar accusations to remove Jerome Powell from office.  

The political economy of central bank independence is straightforward: it’s our best defense against inflation. Congress and the executive branch have a well-documented tendency to spend more than they collect in taxes. To cover the deficit, the federal government issues bonds. If the Fed were reduced to a mere appendage of the Treasury, markets would rightly assume that the Fed would print money to buy those bonds, no matter how profligate the spending. That’s a recipe for disastrous inflation. Venezuela experienced over 80,000% inflation in 2018 and over 1,000% percent inflation in 2020 and 2021. Hyperinflation and price controls are some of the main reasons why many Venezuelans struggled to survive and sought refuge in the United States. We don’t want Americans struggling to survive and seeking safety in Canada and Mexico.  

Preserving the Fed’s independence is crucial to controlling inflation and maintaining economic stability and confidence in our financial system. Chair Powell’s term ends on May 15, 2026. He should be allowed to complete it without political interference.