WASHINGTON — On Thursday, a member of the Federal Reserve provided an extensive argument in favor of the central bank’s autonomy from political influence, coming shortly after the re-election of former President Donald Trump, a notable critic of the Fed. Adriana Kugler, one of the seven members on the governing board of the Fed, stated in her remarks at an economic conference held in Montevideo, Uruguay, that “central bank independence is fundamental to achieving good policy and good economic outcomes,” as recognized in economic research.

Kugler emphasized that studies show a strong correlation between higher independence of central banks in wealthy nations and lower rates of inflation. Her comments were timely, as they followed a statement from Fed Chair Jerome Powell, who had firmly rejected the notion that Trump could legally dismiss him, despite Trump mentioning that he had considered such an action during his first term in office. Moreover, Powell made it clear that he would not step down even if Trump requested his resignation.

During a recent gathering at the Economic Club of Chicago, Trump disclosed that he had discussed terminating Powell. He articulated, “I was threatening to terminate him, there was a question as to whether or not you could.” Although Trump indicated during the campaign that he would allow Powell to fulfill his term until May 2026, he also remarked, “I have the right to say I think you should go up or down a little bit,” suggesting a potential influence over the Fed’s policies.

Kugler’s comments reflected the consensus among economists against the involvement of politicians in decisions regarding interest rates. She explained that a central bank operating free from political pressures can make necessary but unpopular decisions, such as increasing interest rates, which might initially create economic discomfort but ultimately lead to long-term advantages by mitigating inflation.

Moreover, Kugler contended that an independent Federal Reserve garners greater credibility from the financial markets and the general public. Typically, consumers and business leaders trust that the central bank can maintain low inflation in the long term. This expectation plays a significant role in stabilizing inflation levels, particularly after sharp increases, like the notable rise in consumer prices from 2021 to 2022, which peaked at 9.1%. Recent government statistics indicate that this figure has now decreased to 2.6%.

“Despite a very large inflation shock starting in 2021, available measures of long-run inflation expectations … increased just a bit,” Kugler observed. “Anchoring of inflation expectations is one of the key elements leading to stable inflation.”