For governments, it is a win-win: They get to shift the blame for any failure while basking in the event of success. There was a strong whiff of such empowerment in President Joe Biden’s remarks to Federal Reserve Chair Jerome Powell on Tuesday. “My plan is to address inflation,” Biden declared. “That starts with a simple proposition: respect the Fed, respect the Fed’s independence, which I have done and will continue to do.”
When inflation is raging in an important election year, the best political move may be to outsource the fight to central banks. After all, price stability is a huge part of their job. Government leaders might discover, though, that the cost of curbing inflation is an ugly recession. It is unclear whether they are prepared to handle that outcome.
With price increases running at the fastest pace in decades across Europe, the Americas and the Antipodes, there is good reason to let monetary chiefs get on with their task absent political pressure. Central banks, in theory at least, are able to move quickly and free of the horse-trading that comes with legislative solutions.
