Some Observations on Central Bank Accountability

The independence of the Federal Reserve System within government ensures that monetary policy is insulated from fiscal policy. Yet, calls for the central bank to fine-tune the money supply in response to economic woes continue to be heard. If the Federal Reserve were given a clear legislative mandate to achieve price-level stability and financial market efficiency—along with the independence and accountability necessary to realize these goals—maximum economic growth would be the result. These objectives apply to the System's role in discount window lending and to its relationship with the Treasury in the realm of exchange-rate policy.