Hi. I'm Ryan Boyle, Chief US Economist for Northern Trust. In case you hadn't heard, this is an election year in the United States. This places economic policy under a microscope. Decisions are parsed for any sign that they may favor one party or another. This scrutiny will include the Federal Reserve. 

By philosophy and by design, the Fed is independent, but that doesn't stop speculation that their choices might be politically motivated. Recent research that I completed suggests that these suspicions have no basis in fact. I understand why there's some skepticism around this point. Further back in history, we can find examples of presidents exerting influence over their appointed Fed chairs to keep conditions easy. Subsequent leaders have learned from those mistakes. 

The Federal Open Market Committee first started publishing a target overnight rate in the early 1980s. We can thus study election years 1984 onward to see if policymakers behaved any differently in the interval of January through October before polls opened in November. 

Let's first set aside 2008 and 2020 when the Fed justifiably cut rates in response to crises. In the remaining eight elections, we see a central bank that has held steady, raised rates, cut rates, and even gone in both directions in the same year. 

The Fed has a dual mandate of maximum employment and stable prices. Past election year decisions can be explained by prevailing conditions at the time. For instance, the Fed hiked during campaign 2000. That was the tail end of the dot-com boom, and inflation was on the rise. A recession ensued after that election. As the growth cycle gained momentum in 2004, higher inflation called for hikes. 

As I researched, I also realized that easier policy doesn't necessarily help the incumbent. Cuts in 1992 did not keep George H.W. Bush in office, while hikes in 2004 were not an obstacle to his son's re-election. 

Voters often focus on pocketbook issues. The level of interest rates is only one factor in households' sense of well-being. The state of job markets and equity markets also matter a great deal. Inflation erodes purchasing power, so efforts to contain it could be viewed favorably. And the Fed is not omnipotent. Actions it takes may not have much of an influence on conditions that prevail on election day. 

Surveying today's landscape, I doubt any persuadable voters would make their decision based on monetary policy. Even if interest rates could sway electoral decisions, those swing voters will go to the polls in November 2024 in a much higher rate environment than they encountered in 2020. The Fed is navigating a complex environment of firm inflation and tight labor markets. Policymakers have a hard enough job balancing their mandate without adding a political dimension. 

Commenting on political topics is always a delicate proposition for people like me. I have to stick solely to the facts, and the facts simply don't show a pattern of bias or any clear agenda. As the election draws nearer, we will discuss some of the trickier economic policy topics at stake. But I don't expect the Fed's independence to be on the list.