The article below explains that all around the world, central banks are facing increasing pressure from domestic policymakers, jeopardizing and incrementally encroaching upon their status as politically independent entities. In the United States, President Trump has clearly expressed his displeasure towards the policies of the Federal Reserve, who wants to keep inflation low. However, with low inflation comes higher short-run unemployment, threatening President Trump's ability to get re-elected in 2020. As his voter base is composed of many import-competing industries who want growth in the domestic economy, President Trump is incentivized to pressure the Fed into lowering interest rates. Thus, in order to appeal to his voter base, President Trump must interfere with monetary policy.
These actions, however, may have dangerous implications. As discussed in class, central bank independence is crucial for price stability, as technocrats are generally insulated from public opinion. Thus, employers and employees will trust the target inflation rate set by these central banks, resulting in the absence of runaway inflation rates caused by politicians thinking on a shorter time horizon. Consequentially, there will be "lower unemployment over the long run" (Oatley 291), which benefits the economy more than temporarily low unemployment. It is therefore not optimal for President Trump to interfere with the Fed's independence; nevertheless, as a rational actor, he is making a decision that maximizes his own utility (re-election).