Planet Money Two Indicators: Inside the Fed, then and now
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Feb 16, 2023 Mary Daly, president of the Federal Reserve Bank of San Francisco, shares her inspiring journey from high school dropout to an influential voice in economic policy. She discusses the human side of the Fed and the complex dynamics of decision-making during her tenure. The conversation also revisits Arthur Burns' controversial leadership in the 1970s, highlighting the political pressures he faced and the lessons they hold for current monetary strategies, particularly regarding inflation and interest rates in today's economy.
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Nixon's Pressure on Burns
- Arthur Burns, Fed chair in the 1970s, faced pressure from President Nixon to keep interest rates low.
- Nixon publicly joked about Burns following his economic views, despite the Fed's supposed independence.
Burns' Initial Inflation Stance
- While known for letting inflation rise, Burns initially aimed to combat it.
- He prioritized avoiding recession and wanted other government branches to help control inflation.
Factors Influencing Burns
- Two factors shaped Burns' interest rate approach: a fragile financial system and supply-driven inflation.
- He feared destabilizing the system and questioned raising rates for supply-side issues.