U.S. Treasury Secretary Bessent Proposes Reforming Federal Reserve Oversight Based on Bank of England Model

Gate News reports that on March 26, 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 Fed 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, when the Bank of England was granted operational independence to set monetary policy. Although both central banks maintain formal independence from their respective governments, the Fed has greater autonomy in how it achieves Congress’s mandates for price stability and full employment, as well as in responding to financial instability. Yellen has publicly stated that the Fed should undergo reforms while maintaining its monetary policy independence. Last year, she published a 6,000-word article in the International Economics journal criticizing the Fed’s large-scale bond-buying program (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 continued quantitative easing. She believes the Fed’s quantitative easing policies contributed to the high inflation in the U.S. following the COVID-19 pandemic.