MNI FedSpeak Podcasts Mester Says FOMC To Go Own Way If New Fed Chair Lacks Credibility
Aug 14, 2025
Loretta Mester, former president and CEO of the Cleveland Fed and adjunct finance professor at Wharton, discusses the critical role of the Federal Reserve's independence. She highlights how the next Fed chair must navigate political pressures to maintain credibility. Mester delves into the challenges posed by presidential influence on monetary policy and emphasizes the need for consensus in the FOMC. She also explores the effects of tariffs on inflation and how businesses are adapting to economic changes while advocating for the long-term benefits of free trade.
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Why Central Bank Independence Matters
- Central bank independence yields lower and steadier inflation without harming output growth.
- Loretta Mester says insulating monetary policy from politics produces better outcomes for the public.
Markets React To Threats Against The Fed
- Markets reacted to political attacks on Fed leadership with stock drops and higher bond yields.
- Mester notes those moves show investor concern about threats to Fed independence.
Prioritize Long-Term Policy Horizons
- Keep monetary policymakers focused on long-term outlooks because policy effects take time.
- Avoid short-term political pressures that bias decisions toward immediate gains over future stability.