00:00Can you just, as a governor, just say, why is central bank independence considered so important for controlling inflation and achieving economic growth?
00:08Sure. So, you know, central bank independence is going to lead to better policy.
00:15It's a means to an end, not the end in itself.
00:19What you want is to have monetary policy that's attuned to the business cycle,
00:24that's tight when the economy calls for tight policy and loose when the economy calls for loose policy,
00:30not to have monetary policy that's attuned to a different calendar, say, political calendar or anything else, the sports calendar.
00:36You know, you would want monetary policy to be tied purely to the economic cycle.
00:43Central bank independence is going to increase the likelihood that that's the case.
00:46And so, therefore, it's going to increase the likelihood that you get good economic policy,
00:50and it's going to increase the likelihood that you get good economic outcomes.
00:54So you've written that the Fed is not as independent as people think,
01:00and that the boundary between independence and sort of policy dependence is a little blurred in practice.
01:06Can you explain that a little bit?
01:09So, look, I mean, the Fed, you know, accountability for the Fed runs through the Congress.
01:14You know, the chairman of the Federal Reserve testifies to Congress twice a year.
01:18Lots of people in the Federal Reserve have had experience in various branches of government.
01:22I, myself, was previously at the Council of Economic Advisors.
01:25We've got other people at the Fed who have been at the Council of Economic Advisors,
01:29who have been at the Treasury Department, who have been in other agencies of the government.
01:33And there's a lot of collaboration between the Fed and other parts of the government,
01:37you know, particularly in times of a crisis.
01:39You get extensive collaboration between the Fed and the Treasury Department.
01:42And so it's not the case that the Fed exists in some totally, you know, walled-off silo,
01:48totally divorced from the world.
01:50You know, there's a lot of information that comes to the Fed that affects the decisions that we make
01:54that come from outside the world, from the outside world.
01:58There's a lot of decisions that we make that are deeply integrated with what other agencies are doing,
02:02particularly in times of a crisis.
02:03So, you know, there's no such thing as absolute 100% pure independence.
02:08Nevertheless, it is really important that we make decisions that we make for the economic cycle
02:12to be tight when the economy calls for tight and to be loose when the economy calls for loose,
02:17and for no other reason.
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