Central Bank Independence and Accountability

Keynote Presentation by David Wheelock

Presentation slides (PDF)

Congress established the Federal Reserve in 1913 as a politically independent central bank. This independence was a foundational tenet, but the Fed has lost only to regain that independence during its more than 100-year history. What does central bank independence really mean, and why might a country want an independent central bank?

In this recorded presentation David Wheelock, senior vice president and special policy advisor to St. Louis Fed President James Bullard, explores political pressures on the Fed over time, and why central bank independence requires transparency and accountability. Following his presentation, Wheelock is joined by Fernando Martin, St. Louis Fed economist and research officer, for a Q&A session.

• (0:00) Introduction by Kristie Engemann, senior coordinator at the St. Louis Fed
• (1:37) David Wheelock presents “Central Bank Independence and Accountability”
• (2:11) Presentation overview:
• What is central bank independence and why is it important?
• How about a gold standard?
• How independence was built into the Federal Reserve System
• How the Fed lost and then regained independence
• Making tough decisions in a politically charged environment: Can a central bank be both independent and accountable?
• (3:17) Central Bank Independence
• (5:42) The Case for Central Bank Independence
• (7:44) Central Bank Independence and Inflation
• (8:52) What about the Gold Standard?
• (9:40) Is Central Bank Independence as Good as Gold?
• (11:55) Price Stability?
• (14:05) World’s First Central Bank (The Riksbank, 1668)
• (14:49) Independence and the Founding of the Fed
• (16:50) The Solution: Not a “Central Bank”
• (17:35) The Fed Has Never Been Fully Independent
• (19:55) Independence!
• (21:12) Independence Since the Accord!
• (23:10) Political Pressures Since the Accord
• (23:35) If you can’t stand the heat …
• (24:28) The Ebbs and Flows of Political Pressure
• (30:40) Are Big Deficits a Threat to Fed Independence?
• (32:10) National Debt Measures
• (33:15) Independent but Accountable
• (34:30) Kristie Engemann introduces Fernando Martin
• (35:31) Panel discussion and Q&A

Related Resources from the St. Louis Fed

Publications and Special Releases

• Page One Economics: Independence, Accountability, and the Federal Reserve System (May 2020)
• Annual Report 2013: 100 Years of Service
• Annual Report 2009: Independence + Accountability: Why the Fed Is a Well-Designed Central Bank and related Review article (September/October 2011)
• In Plain English: Making Sense of the Federal Reserve

Blog Posts

• Open Vault blog: Is the Federal Reserve Part of the Government? (Nov. 28, 2018)
• Open Vault blog: Here’s the Difference between Fiscal Policy and Monetary Policy (Oct. 10, 2018)
• Open Vault blog: Four Common Myths about the Federal Reserve (June 27, 2018)
• On the Economy blog: Financing the U.S. Response to COVID-19 (Dec. 1, 2020)
• Open Vault blog: Debt-to-GDP Ratio: How High Is Too High? It Depends (Oct. 7, 2020)

Speeches/Remarks and Materials from the Board of Governors and the Federal Reserve System

• Treasury–Federal Reserve Cooperation and the Importance of Central Bank Independence (by Governor Christopher Waller, March 29, 2021)
• Brief Remarks at the premiere of “Marriner Eccles: Father of the Modern Federal Reserve” (by Chair Jerome Powell, Oct. 7, 2019)
• Central Bank Independence, Transparency, and Accountability (by then-Chair Ben Bernanke, May 25, 2010)
• Balance of Power: The Political Fight for an Independent Central Bank, 1790-Present (Federal Reserve Bank of Kansas City, June 2012)
• The Evolution of Fed Independence (Federal Reserve Bank of Richmond, Fall 2009)
• FAQs: About the Fed