Fed before Interest Rate Adjustment: Judy Shelton Calls for Extensive Reforms

Following the September meeting of the Federal Open Market Committee (FOMC), the U.S. Federal Reserve is on the brink of deciding to cut interest rates. Fed Chairman Jerome Powell will hold a press conference this afternoon to address this development. Economist Judy Shelton, Senior Fellow at the Independent Institute, discussed with the Morning Brief team the necessary reforms at the Federal Reserve. Shelton, who was nominated for the Fed by former President Donald Trump in 2019 before the process stalled in 2020, has precise ideas about the reforms. According to Shelton, the mechanism the Fed uses to implement its monetary policy decisions needs to be revised. She criticized the generous payment to commercial banks and money market funds for deposits in light of the current interest rate range of 5.4 percent. Shelton, author of the book "Good as Gold: How to Unleash the Power of Sound Money", regards the flooding of markets with liquidity due to Fed rate hikes as a problem. She believes it is now crucial to manage these funds to prevent further inflation. She looks admiringly at the policies of Paul Volcker, who served as Fed Chairman from 1979 to 1987 and acted through open market operations. In a related note, Donald Trump recently stated that, if re-elected, Tesla CEO Elon Musk could lead the government's reform initiatives. Shelton supports this idea, viewing Musk as a suitable candidate who understands how to identify inefficiencies and reduce expenditures. "I want someone with a good sense of efficiency who is willing to take a closer look at the Fed. Musk seems to be a willing candidate, who would even work without pay. I'm convinced he could identify unnecessary expenses and thereby gain taxpayers' approval," Shelton explained.