| I'm Chris Anstey, an economics editor in Boston, and today we're looking at the roots of Fed independence, which some fear may be at risk in coming years. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here. Donald Trump in August said he felt strongly that the president should have some "say" in Federal Reserve policy setting. Surprisingly enough, a head of the Fed itself, Marriner Eccles, advocated just that position when Congress debated legislation to reorganize the US central bank in 1935. With Trump now president-elect, the historical record is worth examining ahead of any clash over interest rates. Skipping to the conclusion: lawmakers rejected the idea. Eccles oversaw preparation of the first draft of the 1935 bill. He proposed to "subordinate monetary policymaking to the president," according to a National Bureau of Economic Research working paper published this month. Fed board members "would serve at the pleasure of the president, who could replace them at any time and for any reason." Along with other provisions, this was necessary, in Eccles' view, "to ensure that monetary could be formulated and implemented by the executive branch," Gary Richardson of the University of California, Irvine, and David Wilcox of the Peterson Institute for International Economics wrote in the paper. That entire approach was then rejected by Congress in the final bill.  The Fed's first main building is named after the late Marriner S. Eccles. Photographer: Moriah Ratner/Bloomberg As debate ensued, even Henry Morgenthau, the Treasury secretary of the time and a personal confidant of President Franklin Roosevelt, dismissed the Eccles framework. Make the Fed "just as independent as you can make it," he said — "independent of the president," and like the Supreme Court. Speaking of the Supreme Court, any attempt by Trump to subordinate monetary policy to the president could end up there. In which case, the original congressional intent could prove vital. The House and Senate had different versions of the bill, and the "voluminous record" in getting to the end result plainly shows the ultimate intent, Richardson and Wilcox wrote. "After carefully considering all sides of the issue, they gave a clear verdict," Wilcox, also a Bloomberg Economics economist, said Tuesday. "They considered making the Fed subservient to the president," he said. But "in their judgment, the Fed needed to be one step removed from the political process if it was to have the best chance of generating wise monetary policy," Wilcox said — a view widely, if not universally, shared by Fed watchers and investors alike. - On our final episode of Voternomics, Peter Turchin, author of End Times: Elites, Counter-Elites and the Path of Political Disintegration, joins Stephanie Flanders, Allegra Stratton and Adrian Wooldridge with some sobering predictions for America's future.
- Japan's exports picked up more than expected in October as demand from China and the rest of Asia held firm in the face of uncertainties overseas. Separately, the IMF lowered its forecast for South Korea's economic growth, pointing to rising headwinds facing that export-reliant nation.
- India's finance minister is pushing for lower rates.
- UK inflation accelerated more than forecast in October to well above the Bank of England's 2% target. Meanwhile, South Africa's inflation rate declined to a more than four-year low, heralding another reduction in borrowing costs on Thursday.
In a cooling US labor market, recent college graduates are among those feeling the chill most, according to a breakdown of the latest data published Tuesday by the Federal Reserve Bank of New York. The gap between the unemployment rate for recent graduates and the overall rate for Americans with a college degree widened to 2.8 percentage points in September. That's the largest on record going back to 1990, aside from a few months early in the pandemic. The gap has increased from 2 percentage points in June, according to the New York Fed data. It averaged 1.6 percentage points over the period since 1990. The numbers illustrate the growing difficulty for recent graduates — aged between 22 and 27 — of gaining a foothold in a labor market that only recently was reckoned to be tight. | 
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