The Federal Reserve may have more at stake than economic growth as policymakers prepare to meet on rates this coming week.<\/p>\n
In an interview with CNBC<\/a> on Thursday, Moody\u2019s Analytics chief economist Mark Zandi said recent job numbers<\/a> have been so dismal that it\u2019s possible the U.S. may already be in a recession.<\/p>\n \u201cI think the Federal Reserve desperately wants to avoid that kind of outcome,\u201d he added. \u201cObviously nobody wants a recession. But also in the context of Fed independence, they really don\u2019t want to get blamed for going into a downturn because that would impair their ability.\u201d<\/p>\n Wharton finance professor Jeremy Siegel laid out just such a scenario in July, when he told CNBC<\/a> that Fed Chairman Jerome Powell may need to resign in order to preserve the central bank\u2019s long-term independence.<\/p>\n His reasoning: If the economy stumbles with Powell still at the helm, then Trump can point to him as the \u201cperfect scapegoat\u201d and ask Congress to give the White House more power over the Fed.<\/p>\n \u201cThat is a threat. Don\u2019t forget, our Federal Reserve is not at all a part of our Constitution. It\u2019s a creature of the U.S. Congress, created by the Federal Reserve Act 1913. All its powers devolve from Congress,\u201d Siegel explained. \u201cCongress has amended the Federal Reserve Act many times. It could do it again. It could give powers. It could take away powers.\u201d<\/p>\n Meanwhile, Stephen Miran is set to join the Fed\u2014without resigning as chair of the White House\u2019s Council of Economic Advisers\u2014after previously calling for changes that would erode its independence before he joined the Trump administration.<\/p>\n In a note last month, JPMorgan said Miran\u2019s appointment to the Fed<\/a> \u201cfuels an existential threat as the administration looks likely to take aim at the Federal Reserve Act to permanently alter U.S. monetary and regulatory authority.\u201d<\/p>\n Despite the enormous pressure Trump has put on the Fed to lower rates, even trying to fire Governor Lisa Cook, central bankers have largely resisted his calls so far. But the sudden deterioration in the job market has made a rate cut a virtual certainty.<\/p>\n