""There's too much fascination with the Fed," Moynihan said. The economy is driven by the private sector, which includes small, medium, and large companies as well as entrepreneurs, he added. "The idea that we are, like, hanging on the thread by the Fed moving rates 25 basis points, it seems to me we've gotten out of whack," he said."
"The interview was recorded on Dec. 17, a week after the central bank lowered rates by a quarter point for a third consecutive meeting amid mounting signs of weakness in the labor market. While the bank chief doesn't think most Americans should fixate so much on the Fed's rate moves, Wall Street has been counting on more easing to keep the stock market rally going."
"Moynihan also acknowledged the Fed is the lender of last resort and plays a key role in stabilizing the economy, markets, and prices in times of extreme stress, such as during the financial crisis and the COVID-19 pandemic. "But other than that, you shouldn't know they exist, quite frankly," he said. However, when pressed about political interference worries at the Fed when a new chair takes over, he replied: "The market will punish people if we don't have an independent Fed.""
The U.S. economy is much larger than the Federal Reserve and is driven by small, medium, and large companies and entrepreneurs. Excessive focus on quarter-point Fed rate changes misstates the scale of private-sector influence on economic outcomes. The Fed retains a critical role as lender of last resort and in stabilizing markets, prices, and the economy during crises such as the financial collapse and the COVID-19 pandemic. Wall Street expects further easing to support equity rallies, while political pressure on Fed independence raises concerns about potential market reactions if independence is undermined.
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