Economic Quarterly

A former Vice Chairman of the Board of Governors of the Federal Reserve System states his opinion on the Fed's constituency, its policy goals, its need for credibility and independence, and its obligation to be open, accountable, and candid in a democratic society. He argues that the Fed is, and should be, charged with the responsibility of pursuing the two compatible goals of price stability and low unemployment. He acknowledges that the Fed performs best when independent of politics. He maintains that such independence is consistent with democracy as long as the public's elected representatives set the Fed's policy goals, appoint its leaders, and retain ultimate control in cases of dire emergency.