Americans have started to question the independence of the Federal Reserve, a dangerous trend for the future of monetary policy and the nation’s economy, outgoing Atlanta Fed President Raphael Bostic said.
The independence of the central bank from politics and partisan infleunce must be safeguarded, Bostic said in an essay published on the Atlanta Fed’s website Feb. 25.
Bostic’s last day at the helm there, which he called “the best job I’ve ever had,” is Feb. 28.
“The Fed is critical to the nation’s well-being,’’ Bostic said. “Its primary duties are to safeguard financial stability and to formulate monetary policy aimed at establishing a foundation for broad prosperity.”
Bostic said it’s important that the public understand what is at stake when the Fed’s independence is at risk.
“Decades of lived experience, as well as a large body of academic research, makes clear that a nation’s economic outcomes are better when there is an independent central bank,’’ he said.
“Inflation is lower, economic performance is more robust, and consumers and businesses alike are more confident that long-run investments will be worth making,’’ he added.
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White House pressures the Fed for lower interest rates
The Fed system includes 12 regional bank presidents, along with the Washington-based Board of Governors, appointed by the president and led by the influential chair of the central bank.
The regional presidents rotate voting duties on monetary policy on the Federal Open Market Committee. All participate in debate at the regular policy-setting meetings, typically held about every six weeks.
The central bank’s independence from pressure from the executive branch has reached several inflection points during the second Trump administration.
- The Fed has faced intense criticism over the past year from President Donald Trump, Treasury Secretary Scott Bessent, and other administration officials who want interest ratesdramaticallylowered to 1% or less.
- The president has attempted to fire Fed Governor Lisa Cook over unsubstantiated mortgage fraud allegations. Cook is challenging the effort through the federal courts, most recently in a hearing before the Supreme Court, whose ruling is expected this spring.
- The Department of Justice served the Fed with criminal subpoenas related to congressional testimony Chair Jerome Powell gave about the central bank’s ongoing $2.5 billion building renovation. Powell has said the unprecedented probe is part of the Trump administration’s efforts to influence monetary policy.
- White House National Economic Council Director Kevin Hassett said a team of New York Fed economists should be “disciplined” for recent tariff research, which showed that American consumers and businesses pay nearly 100% of the administration’s global tariffs.
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Bostic cites long-term impact of legal, rhetorical battles
“My travels over the past several months have made clear that the legal and rhetorical battles raging around the central bank right now have caused people across a wide cross-section of our population to begin to doubt the Fed’s independence,” Bostic said in the essay. “This is a major concern.”
Bostic is hopeful that the guardrails maintaining the Fed as an independent institution, at least in setting monetary policy, will hold, he told Reuters in an exclusive interview.
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There is, for example, no sense that the Fed’s staff are shying away from different issues because of the potential political fallout, Bostic said, though he noted there is heightened attention to ensure that research findings are “descriptive” and not “normative.”
“I won’t be part of the Fed when we see resolutions of these battles,” Bostic said in his essay.
“I will be watching closely and hoping that wisdom grounded in the profound success of the U.S. economy over many years prevails,’’ he added.
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Fed sets monetary policy for “the long run”
Bostic, 59, has served as president of the Atlanta Fed since 2017.
He holds a Ph.D. in economics from Stanford University and is the first Black and openly gay president of a Fed regional bank.
“The Federal Reserve’s ability to set monetary policy with a primary focus on the long run has been an important underpinning of the world’s most trusted financial markets and most dynamic economy,’’ Bostic said.
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“But that global position is not guaranteed. Safeguarding our special status includes protecting the Fed’s independence,’’ he added.
In the United States, an independent Fed has helped keep the nation’s economy “the strongest in the world, a safe haven from risk and one that is admired and envied,’’ Bostic said.
Expert: Trust essential for successful monetary policy
Ryan Chahrour is a professor of economics and international studies at Cornell University. He said threats to the Federal Reserve’s independence are already making it harder for the Fed to do its job today.
“While market movements have been modest so far, they signal declining trust in the ability or willingness of future FOMC members to achieve the Fed’s inflation objectives,’’ he said.
The last 30 years of economic research and practical experience around the world all tell us that this trust is essential for successful monetary policy,’’ Chahrour said.
The search for Bostic’s replacement underway
The Atlanta Fed serves the Sixth Federal Reserve District, which covers Alabama, Florida, and Georgia, and parts of Louisiana, Mississippi, and Tennessee. The Bank has branches in Birmingham, Jacksonville, Miami, Nashville, and New Orleans.
Atlanta Fed directors who are not bankers have formed a committee that will conduct a broad search to identify a large pool of candidates with meaningful ties to the Sixth Federal Reserve District. Heidrick & Struggles, an executive search firm, is assisting in the search process.
The search committee will identify a finalist, who will be submitted to the Fed Board of Governors, and the Atlanta Fed’s non-banker directors will formally appoint the next president, subject to the Board of Governors’ approval.
Bostic has not publicly announced his post-retirement plans.
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