Abstract
In 1913 the Federal Reserve Act established a central bank which was hailed as being independent of the executive branch of government. In recent decades this independence often seems to have been honored as much in the breach as in the keeping. On occasion, executive branch attempts to influence monetary policy have even become media events. Consequently, a consensus is emerging in the monetary policy literature which rejects as mythic the belief that the Federal Reserve is an independent, politically neutral institution. The contemporary view is that the Administration, while granting significant leeway to the Fed, when necessary obtains the monetary policy actions that it desires (e.g., Beck 1988, Friedman 1982, Poole 1985, Woolley 1984, and Lombra and Moran 1980).
My experience, through every Administration . . . indicates that there is always going to be pressure applied to the Federal Reserve Board.
— Governor Benjamin Strong of the Federal Reserve Bank of New York at a Federal Reserve Governors’ Conference in 1921, quoted in U.S. Congress, Federal Reserve Structure and the Development of Monetary Policy (1971).
One taboo has already been broken by Mr. Kennedy however. His open promise to use the President’s influence in steering Federal Reserve policy is a departure from the rule first laid down by Woodrow Wilson.
— Wall Street Journal,September 1, 1960.
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Havrilesky, T. (1993). Executive Branch Pressures on Monetary Policy: 1914–1991. In: The Pressures on American Monetary Policy. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-2228-4_3
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