Speaking at an event at the University of Michigan’s Ford School of Public policy the Federal Reserve chair Janet Yellen said that the independence of Federal Reserve is under some threat from the political class in Washington. She cited two bills which are currently under consideration at Capitol hill; one being ‘Audit the Fed’, which according to the policymakers would cut down Fed’s ability to respond to a crisis and the other one is to make the Fed’s interest rate decision making based on a specific rule such as the Taylor rule that prescribes a value for the federal funds rate, the short-term interest rate targeted by the Federal Open Market Committee (FOMC), based on the values of inflation and economic slack such as the output gap or unemployment gap.

She said, “Our independence is under some threat. There is a bill called Audit the Fed that has been put forth in Congress for a number of years that would end our independence in making monetary policy decisions. And another bill that’s passed the House of Representatives and goes even further in interfering with monetary policy independence would require us to follow a simple mathematical rule in setting interest rates and if we deviated from it would call in the General Accounting Office to conduct audits. I always worry about threats to independence and I think our macro performance is better and the US is well served by having a non-partisan group shielded from short-term political pressures [in] making these important decisions.”

President Trump campaigned in favor of auditing the Fed and recently Senator Rand Paul has called for the passing of the bill.