The myth of federal reserve de facto independence

Abstract

In the literature on central banks independence these institutions are considered as being apolitical. In reality, central banks are political actors and their de facto independence changes over time even if their de jure independence remains unvaried. An example of this is the Federal Reserve Bank (Fed), whose de facto independence in the past decades has fluctuated significantly because of the pressures of Congress and the President. To counter these pressures, the Fed seeks support from certain interest groups. The success of this behavior is more likely when the President and Congress represent different political parties.