Former Fed Chairs Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen stressed the need for an independent Federal Reserve to make monetary policy decisions free of any influence for political gain in an op-ed published in The Wall Street Journal reported Aug. 5.
"Each of us had to make difficult decisions to help guide the economy toward the Fed's legislated goals of maximum employment and stable prices," it reads. "In retrospect, not all our choices were perfect. But we believe those decisions were better for being the product of nonpartisan, nonpolitical assessments based on analysis of the longer-run economic interests of U.S. citizens rather than being motivated by short-term political advantage."
The former central bank chairs also pointed to a history of political motivations for monetary policy changes leading to worse long-run economic trends, like higher inflation and slower growth.
"Even the perception that monetary-policy decisions are politically motivated, or influenced by threats that policy makers won't be able to serve out their terms of office, can undermine public confidence that the central bank is acting in the best interest of the economy," the former chairs said in the op-ed. "That can lead to unstable financial markets and worse economic outcomes."
The call for Fed independence follows continued criticism of current Fed Chairman Jerome Powell by President Donald Trump. Trump tweeted that Powell "let us down" after the central bank cut the federal funds rate by 25 basis points at its July FOMC meeting, as Trump has repeatedly called for lower interest rates.
The former chairs also cautioned against setting a political precedent for selecting a new potential chair after the end of Powell's term.
"When the current chair's four-year term ends, the president will have the opportunity to reappoint him or choose someone new," the op-ed reads. "We hope that when that decision is made, the choice will be based on the prospective nominee's competence and integrity, not on political allegiance or activism. It is critical to preserve the Federal Reserve's ability to make decisions based on the best interests of the nation, not the interests of a small group of politicians."