Bessent Seeks to Reform Oversight of the Federal Reserve, with the Bank of England as a Reference Point

BlockBeats News, March 26 — According to the Financial Times of the UK, U.S. Treasury Secretary Janet Yellen discussed strengthening the U.S. Department of the Treasury’s oversight of the Federal Reserve by drawing on some aspects of the Bank of England’s model. This move could shake up the relationship between the Federal Reserve and the U.S. government.

According to informed financial industry executives, Yellen has expressed her admiration for the reforms implemented by the UK government in 1997. At that time, the Bank of England was granted operational independence in setting monetary policy. Although both central banks maintain formal independence from their respective governments, the Federal Reserve has greater autonomy in how it achieves Congress-authorized goals of price stability and full employment, as well as in responding to financial instability. Yellen has publicly stated that the Federal Reserve should undergo reforms while maintaining its monetary policy independence.

Last year, she published a 6,000-word article in the journal International Economics, criticizing the Fed’s large-scale bond-buying 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 debt crisis and contrasted it with the Fed’s ongoing quantitative easing policies. She believes that the Fed’s quantitative easing was a cause of high inflation in the U.S. following the COVID-19 pandemic.