Feb 12, 2020 - Economy & Business

Fed picks to raise political independence at confirmation hearings

Illustration: Sarah Grillo/Axios

President Trump's picks to fill the Federal Reserve board, Christopher Waller and Judy Shelton, will publicly air views on the Fed's political independence in a Senate hearing on Thursday, according to released drafts of testimony.

Why it matters: Trump's nominees, particularly Shelton, an economist who has been critical of the Fed and previously served as an adviser to Trump's campaign, will face questions about their commitment to the Fed's nonpolitical economic decisions.

  • Trump has repeatedly tried to goad the Fed into lowering interest rates — flouting the tradition of the executive branch staying out of conversations about monetary policy.

What they're saying: Shelton will acknowledge the central bank's independence, while Waller, a long-time official at the Federal Reserve Bank of St. Louis, will give a bolder defense of a nonpolitical Fed.

  • Waller will reference his research "on the importance of central bank independence for the conduct of monetary policy."
  • Shelton will testify that along with the political independence "granted to the Federal Reserve comes an obligation to be wholly accountable both to Congress and to the public."

The backdrop: Shelton has "questioned the basis of the Fed's independence from the White House," as the New York Times puts it, and has advocated for a return to the gold standard.

  • Waller, a close adviser to dovish Fed member James Bullard, is considered a more traditional pick for the Fed.

What's next: Waller and Shelton will face questions from the Senate Banking Committee on Thursday morning.

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Senators press Trump's Fed pick Judy Shelton

Fed board nominees Judy Shelton and Christopher Waller. Photo: Tom Williams/CQ-Roll Call via Getty Images

Senators questioned Judy Shelton, a former Trump campaign adviser who's been nominated for a seat on the Federal Reserve Board, on her views on monetary issues and Fed independence at a hearing on Thursday.

Why it matters: There was some bipartisan concern about Shelton, which could complicate her path to confirmation — or eliminate chances of confirmation altogether, if the worries hold. President Trump's previous picks to fill the remaining vacant Fed slots — Nellie Liang, Marvin Goodfriend, Stephen Moore and Herman Cain — have failed to make it through.

Judy Shelton vs. Fed independence

Illustration: Aïda Amer/Axios

President Trump hasn't given up on his dream of politicizing the Fed. After failing to get Herman Cain and Stephen Moore onto the Fed's board of governors, his latest candidate is one of his former campaign advisers, Judy Shelton, who testified in front of the Senate Banking Committee today.

Why it matters: Shelton is no more qualified to sit on the Fed board than Cain or Moore. But she's already further along in the process than either of them ever managed.

Federal Reserve leaves interest rates on hold

Jerome Powell. Photo: Sarah Silbiger/Xinhua via Getty

The Federal Reserve said on Wednesday that interest rates would remain between the target range of 1.5% and 1.75%.

Why it matters: Fed chair Jerome Powell said developments in the global economy since the last Fed meeting — namely threats posed by the coronavirus outbreak — have not changed the central bank's wait-and-see approach.

Go deeperArrowUpdated Jan 29, 2020