Recently, critics of the Federal Reserve have called for curbing the Fed's independence. Keeping the central bank at arm's length from partisan politics was a primary consideration when Congress created the Fed in 1913. And central bank independence is still important to preserve today, says Research Director Chris Waller, the author of the Bank's 2009 annual report, Why the Fed Is a Well-Designed Central Bank. Waller says that the Fed's credibility, independence, accountability and transparency combine to make it a well-designed institution.
In a message preceding the essay, Bank President Jim Bullard writes: “As we emerge from one of the worst economic and financial crises in a generation, it is appropriate for the nation to scrutinize the structure and responsibilities of the Federal Reserve System. In a democracy, that’s how it's done. But, as the debate ensues about how best to improve the Fed, we should consider change carefully. In creating the Fed, Congress understood that to ensure good monetary policy, the incentives needed to be right. Independence with accountability in the structure of the Federal Reserve System, in my opinion, was the right approach.”