Cato Podcast Political Pressure and Monetary Policy
Oct 28, 2025
The podcast dives into the political pressures facing the Federal Reserve, revealing the conflicting agendas from Republicans and Democrats. Hosts Norbert Michel and Jai Kedia challenge the assumption that the Fed has absolute control over inflation and economic outcomes. They discuss the impact of COVID stimulus on inflation, the constraints of Fed policies, and the risks of drastic rate cuts. Advocating for clear congressional rules, they argue for a transparent framework to enhance the Fed’s independence and accountability.
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Fed Influence Is Limited
- The Fed matters but is not omnipotent; many blame it for outcomes it cannot fully control.
- Norbert Michel and Jai Kedia stress that monetary policy is one influence among many on inflation and output.
COVID Stimulus Example
- Jai Kedia and Norbert use COVID fiscal stimulus as an example of nonmonetary drivers of inflation.
- They argue Congress' large spending drove demand that the Fed could not alone prevent or immediately fix.
Tightening Has Costly Trade-Offs
- The Fed can tighten to fight inflation but faces painful trade-offs and timing risks.
- Jai Kedia notes calling inflation "transitory" delayed action and worsened policy outcomes.