How much weight does the U.S. president have on interest rate changes?
Question/Comment: How much weight does the U.S. president have on interest rate changes? The news talks about the Federal Reserve, but it seems it was Bush’s idea to bring them down low, so everyone can own a home. I know there are other things to take in consideration, like tax incentives, spending, etc. However, if all these factors were constant, then how much does the president influence the rate? It seems with the election coming up, the president does not want a recession, which used to be a natural part of ebb and flow.
Paul Solman: There’s a long history of suspecting that the Fed is in cahoots with administration in power, especially when the Fed chairman is nearing reappointment, as Ben Bernanke now is. But the Fed is about as close to an independent central bank as a government bank can get. That’s why the even more common complaint has been that it’s undemocratic: the Fed chairman and governors are elected. It’s also why the Fed chairman is commonly referred to as having the second most powerful job in the U.S.
The president does not want a recession. But neither does Bernanke. It’s his job to avoid one.