Civitas Outlook
Topic
Economic Dynamism
Published on
July 24, 2025
Contributors
Carola Binder

Why the Damage to Fed Independence May Have Already Been Done

From Bloomberg's Odd Lots Podcast:

There’s a long history of US presidents putting pressure on the Federal Reserve to lower interest rates, but the techniques have often been subtle or quiet in some way. Under President Trump, attacks on the Fed have risen to a whole new level. And it’s not just Trump that’s called on Chair Jerome Powell to cut rates. Other members of his administration (along with allies in Congress) have been hammering him both on policy and also topics unrelated to monetary policy, such as the cost of renovating the Federal Reserve building in Washington.

Investors are taking seriously the prospect that Trump will find a way or a reason to remove Powell before the end of his term next year. And regardless of when Powell is replaced, there’s a widespread anticipation that the next Fed chair will be someone more closely resembling a Trump loyalist. So do we still have an independent Fed at this point?

On this episode, we speak with University of Texas-Austin economics professor Carola Binder about why central bank independence is so cherished by economists, why mere criticism of the Fed could be inflationary, and whether Fed independence has been permanently damaged.

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Richard Epstein: Law and Economics of Public Sector Unions

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Economic Dynamism

The Causal Effect of News on Inflation Expectations

This paper studies the response of household inflation expectations to television news coverage of inflation.

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To the extent that America faces a real industrial challenge, it’s not that we lack factories; rather, it’s that we lack people to work in them.

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