Bernard Seeks to Reform Oversight of the Fed, Looking to Bank of England as a Model

BlockBeats News, March 26th, according to the Financial Times, U.S. Treasury Secretary Yellen discussed strengthening the Treasury's oversight of the Fed by borrowing some elements from the Bank of England's model, a move that would shake up the relationship between the Fed and the U.S. government.

According to knowledgeable financial industry executives, Yellen has expressed to market participants his admiration for the reforms implemented by the UK government in 1997. At that time, the Bank of England was granted operational independence to set monetary policy. Although both central banks formally maintain independence from their respective governments, the Fed has more autonomy in how to achieve Congressionally mandated goals of price stability and full employment, as well as how to respond to financial instability. Yellen has publicly stated that the Fed should undergo reform while maintaining the independence of its monetary policy.

Last year, she published a 6000-word article in the International Economy magazine criticizing the Fed's large-scale bond purchase program (i.e., quantitative easing) as a "functional monetary policy experiment." She also praised the Bank of England's more cautious response to the 2022 UK bond crisis and compared it to the Fed's ongoing quantitative easing policy. She believed that the Fed's quantitative easing policy was the reason for the high inflation in the U.S. after the COVID-19 pandemic.