Federal Reserve independence: the Fed Funds Rate under different regimes

The independence of central banks is an important feature of a properly functioning and stable monetary system. The structure of the Federal Reserve is designed to minimize political influence and insulate policy makers from political pressure. Nevertheless, members of the Fed's Federal Open Market Committee are members of society and informed about public opinion, potentially opening them to political bias, even if unintentional. This article uses a Taylor rule structure to examine changes in the Fed's reaction function to unemployment and inflation under different political administrations and chairman. Preliminary results show that the Fed is more responsive to the output gap under Republican presidential administrations and sets the Federal Funds Rate at a lower level under Republican administrations.