{"id":182,"date":"2026-05-04T10:31:48","date_gmt":"2026-05-04T14:31:48","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=182"},"modified":"2026-05-04T10:31:48","modified_gmt":"2026-05-04T14:31:48","slug":"why-central-bank-independence-is-key-to-controlling-inflation-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2026\/05\/04\/why-central-bank-independence-is-key-to-controlling-inflation-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"Why Central Bank Independence Is Key to Controlling Inflation\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><span data-contrast=\"auto\">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.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Maintaining low and stable inflation should be the Fed\u2019s 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\u2019s credibility and, by extension, the stability of the U.S. economy.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">We haven\u2019t agreed with every decision Powell has made. But the idea of removing him over\u00a0<\/span><a href=\"https:\/\/www.pbs.org\/newshour\/politics\/how-trump-could-use-an-expensive-fed-building-renovation-to-oust-powell\"><span data-contrast=\"none\">exaggerated claims, such as overspending on Fed buildings<\/span><\/a><span data-contrast=\"auto\">, is reckless. The President\u00a0used\u00a0trumped-up (pun intended) charges of overspending at the Fed building to justify pressuring Powell\u00a0to 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\u00a0Democrats&#8217;\u00a0attempts to undermine his re-election by accusing, charging, and convicting him of\u00a0real estate\u00a0fraud.\u00a0He shouldn\u2019t make similar accusations to remove Jerome Powell from office.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The political economy of central bank independence is straightforward: it\u2019s 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\u2019s a recipe for disastrous inflation. Venezuela experienced over\u00a0<\/span><a href=\"https:\/\/www.cato.org\/commentary\/venezuelas-hyperinflation-hits-80000-year-2018\"><span data-contrast=\"none\">80,000% inflation in 2018<\/span><\/a><span data-contrast=\"auto\">\u00a0and\u00a0<\/span><a href=\"https:\/\/gfmag.com\/data\/economic-data\/worlds-highest-lowest-inflation-rates\"><span data-contrast=\"none\">over 1,000% percent inflation in 2020 and 2021<\/span><\/a><span data-contrast=\"auto\">. 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\u2019t want Americans struggling to survive and seeking safety in Canada and Mexico.\u00a0<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Preserving the Fed\u2019s independence is crucial to controlling inflation and maintaining economic stability and confidence in our financial system.\u00a0Chair Powell\u2019s term ends on May 15, 2026. He should be allowed to complete it without political interference.<\/span><span data-ccp-props=\"{}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>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.\u00a0 [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[718,8,85],"tags":[1645,4,1187,1647,7,94,1646,114,1288,1385],"class_list":["post-182","post","type-post","status-publish","format-standard","hentry","category-fed","category-inflation","category-macroeconomics","tag-central-bank-independence","tag-federal-reserve","tag-fiscal-policy","tag-hyperinflation","tag-inflation","tag-interest-rates","tag-jerome-powell","tag-monetary-policy","tag-political-economy","tag-venezuela"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Why Central Bank Independence Is Key to Controlling Inflation\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2026\/05\/04\/why-central-bank-independence-is-key-to-controlling-inflation-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Central Bank Independence Is Key to Controlling Inflation\u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"While monetary policy can influence interest rates, employment, exchange rates, and economic growth, we believe its most fundamental role is managing inflation. 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