Now that Donald Trump is the president-elect, expect warnings about the dangers of compromising the independence of the Federal Reserve. Monetary officials will solemnly explain that politics should play no part in decisions about long-term financial stability. We should be more concerned about the concentrated power held by the 12 voting members of the Feds Open Market Committee. Their decisions can decrease or increase unemployment, lower or raise inflation, and repress or stimulate economic growth.
The Feds decisions reward some people and hurt others, with obvious political implications. Almost 62% of the gain in U.S. household wealth over the past four years went to those in the top 10% wealth percentile group. These outsize gains for the wealthiest Americans are a result of monetary policy that sent stock prices soaring, which primarily benefited people already flush with assets.
This kind of wealth inequality prompts voters to demand change. Mr. Trump built his economic agenda around addressing these grievances, promising lower inflation, lower interest rates, higher wages and higher growth. But unless these goals align with the Feds model for achieving its dual mandatemaximum employment and stable pricesthe central bank could undercut Mr. Trumps agenda.