the president has influence on federal reserve policy because of what?
because the president appoints the seven members of the Board of Governors for staggered 14-year terms. The long terms provide a degree of isolation of the Board from policy directives of the president in office.
To understand why the president has influence on the Federal Reserve policy, we need to look into the appointment process and the role of the Board of Governors. Here's how you can explain it:
1. The Federal Reserve is the central banking system in the United States responsible for monetary policy, financial stability, and regulating commercial banks.
2. The Board of Governors is a key component of the Federal Reserve System. It consists of seven members, each appointed by the president and confirmed by the Senate.
3. The president appoints these members for staggered 14-year terms. This means that every two years, one member's term expires.
4. The idea behind the lengthy terms is to ensure that the Board operates independently from political influences, including those from the current president.
5. While the president has the power to appoint members to the Board, once appointed, they are expected to act in the best interest of the economy rather than following any specific policy directive of the president in office.
6. The independence of the Board of Governors is crucial as it allows them to make decisions based on economic data, market conditions, and their expertise, rather than political pressure or short-term goals.
7. However, it's worth noting that the president can still influence the Federal Reserve policy through the appointment process, as they have the ability to select individuals who align with their policy objectives.
8. Additionally, the president has the power to nominate the chair of the Federal Reserve, subject to Senate confirmation, who plays a key role in setting the monetary policy agenda.
In summary, the president's influence on the Federal Reserve policy primarily stems from their power to appoint members to the Board of Governors. However, the long terms of these board members are designed to insulate them from direct policy directives of the president in office, thereby ensuring a degree of independence for the Federal Reserve System.