CRS Reviews Challenges to Federal Reserve Independence

The Congressional Research Service ("CRS") reviewed the current state of Federal Reserve ("Fed") independence amidst recent executive actions aimed at increasing presidential oversight.

In an "In Focus" Report, the CRS detailed recent efforts by the Trump administration to increase presidential control over the central bank, including a February 2025 Executive Order subjecting independent agencies to Office of Management and Budget performance standards. While that Order ostensibly exempts monetary policy, the CRS noted the potential for the administration to leverage regulatory oversight to influence interest rate decisions. The CRS also highlighted significant personnel shifts, such as the resignation of Michael Barr, former vice chair for supervision, the confirmation of Stephen Miran as governor — who retained a role with the President’s Economic Advisers—and ongoing litigation regarding the attempted removal of Governor Lisa Cook.

The CRS explained that central bank independence is traditionally viewed as essential for shielding policymaking from short-term political pressures, thereby fostering long-term stability and lower inflation. The CRS warned that subordinating the Fed to political leadership could erode its credibility with market participants and unanchor inflation expectations. This analysis comes as the President has broken with tradition by publicly criticizing monetary policy decisions and reportedly considering whether cost overruns could constitute grounds for removing Chair Jerome Powell "for cause."

In the report, the CRS reviewed legislative developments in the 119th Congress regarding oversight, including hearings on S. 2327, a bill to remove statutory restrictions on Government Accountability Office audits on the Fed. The CRS said that removing restrictions could effectively politicize monetary policy. Additionally, the CRS referenced a proposal by Senate Banking Committee Chair Tim Scott to reduce the pay of certain Board employees, though this measure was ultimately excluded from the final fiscal year 2025 reconciliation act.