Federal Reserve’s Board of Governors Stability

By Howard Schneider

PALO ALTO, California (Reuters) – The structure of the Federal Reserve’s Board of Governors, which includes members who cannot be fired over policy disputes and whose terms are staggered across presidential terms, has “stood the test of time” and should be preserved, according to Fed Governor Christopher Waller on Friday.

Waller referenced his own previous research and that of others, stating that the U.S. central bank’s system ensures electoral accountability by allowing each U.S. president, serving a four-year term, to appoint some members to the seven-person Board of Governors. The lengthy terms of up to 14 years promote objective, non-partisan policymaking.

This arrangement is believed to lead to better policy outcomes, resulting in lower inflation and reduced economic volatility.

“Economic stability is enhanced by having a group of individuals set policy who could not be removed from office,” said Waller, a former research director at the St. Louis Fed, who was appointed as a Fed governor during President Donald Trump’s first term in office.

Waller shared his views at a monetary policy conference held at Stanford University’s Hoover Institution. “This structure is the one that we have in place today at the Federal Reserve. I would argue that it has stood the test of time, and I hope that it continues to be in place for years to come.”

His remarks come after Trump’s earlier threats to fire Fed Chair Jerome Powell, although the president has since retracted those threats. The Fed is also closely monitoring a U.S. Supreme Court case regarding Trump’s power to dismiss officials in other independent agencies.

Waller refrained from commenting on monetary policy or the economic outlook in his prepared remarks.