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During Congressional testimony in February, Republican Senator Joe Kennedy tried to pin U.S. Federal Reserve Chairman Jerome Powell down on whether or not he supported the $1.9 trillion stimulus plan. Powell responded: “On every public occasion when I’ve been asked about it, I’ve said that it’s not appropriate for the Fed to be playing a role in these fiscal discussions about particular provisions in particular laws.” Throughout the hearing, he dug a moat around the bank’s narrow price stability mandate and refused to comment directly on anything that might fall outside of it.
This separation of fiscal and monetary policy also featured in a heated discussion in Indonesia several months ago. During the Asian Financial Crisis, the collapse of the rupiah plunged Indonesia into a balance of payments crisis and subsequent IMF-led reforms formalized the policy independence of Bank Indonesia. This was intended to insulate the country’s central bank from politic