Institutions outlast political power

The sustained attacks by the US president on the country’s central bank are neither recent nor episodic. They have been a recurring feature of the political landscape since Donald Trump first assumed office, reflecting a persistent unease with institutions that operate beyond direct executive control. What has evolved over time is not the existence of disagreement, but the readiness to treat institutional resistance as illegitimate.

Criticism of the Federal Reserve, and of its chair Jerome Powell, has followed a recognisable pattern. Periods of divergence on interest rates or regulatory posture have been met with public pressure rather than private persuasion. Disagreement has been framed less as a contest of judgement and more as a challenge to authority itself. The issue at stake is therefore not the correctness of any single monetary decision, but the space allowed for independent judgement within a democratic system.

The United States has mattered to the democratic imagination worldwide not because it lacks excesses, but because it has historically demonstrated how institutions can restrain personal agency, even when that agency is exercised from the highest office. The belief that no individual is larger than the system has been one of its most admired, and most stabilising, features. It is precisely this tradition that makes the present moment unsettling.

What marks the current phase as unprecedented is not the intensity of policy disagreement, but its character. A criminal investigation in which the president does not seek to distance himself from the process is rare in a mature democracy. More striking still is the fact that the chair of the Federal Reserve has felt compelled to state publicly and unequivocally that monetary policy decisions are guided by statutory mandate rather than political alignment. Central bank leaders rarely articulate such fundamentals unless those fundamentals are under active strain. The shift from contesting policy to questioning legitimacy signals an escalation that goes beyond normal institutional friction.

This matters far beyond the United States. It speaks to a wider impatience with institutional restraint in an era marked by low growth, high debt, volatile capital flows, and permanent political campaigning. Central banks have become convenient sites of contestation. Monetary caution is easily recast as obstruction, and restraint as indifference to popular need. The temptation to subordinate judgement to urgency is not confined to any one political system.

India offers a useful comparison, not because it mirrors the American experience, but because it shows how similar pressures can manifest in a different institutional culture.

There has been no sustained public campaign against the Reserve Bank of India, nor any attempt to personalise conflict with its leadership. Yet India has experienced moments when the limits of central bank autonomy were tested. The tensions of 2018, culminating in the resignation of RBI Governor Urjit Patel, arose from disagreements over liquidity provision, regulatory oversight, and the use of central bank reserves. The government’s invocation of Section 7 of the RBI Act served as a reminder that ultimate legal authority rests with the sovereign.

The contrast between the United States and India is therefore one of method rather than principle. In the US, pressure has been visible, public, and personal. In India, it has tended to be quieter, procedural, and embedded in statute. But in both cases, the underlying question is the same. How much space is an institution afforded to exercise judgement before divergence itself is treated as defiance.

This brings us to the core issue. When the executive and the monetary authority pull in different directions, whose interest is being served.

Such divergence is often misread as institutional failure. In reality, it is frequently the product of design. Elected governments are expected to prioritise growth, employment, and fiscal flexibility. Central banks are mandated to prioritise price stability, financial risk, and medium term credibility. These objectives do not always align, particularly during periods of inflationary pressure or financial stress. When divergence is tolerated, it forces justification, disciplines short termism, and balances immediate political demands against longer term economic costs. In these circumstances, disagreement serves the public interest.

The danger arises when divergence is no longer tolerated.

When the executive seeks not to persuade but to compel, not to debate but to delegitimise, convergence begins to serve narrower interests. Policy alignment achieved through pressure may ease fiscal constraints or support asset prices in the short run. The costs, higher inflation, financial fragility, and erosion of credibility, are deferred and widely dispersed. The beneficiaries are immediate and identifiable. The risks are long term and socialised.

This is why the language of institutional strength matters more than the rhetoric of absolute independence.

Institutional strength does not imply unaccountable power. It refers to the capacity to exercise judgement with reason, to explain decisions publicly, and to withstand pressure without becoming a political actor in return. A strong institution can absorb criticism without losing legitimacy. A weak one must either submit or retaliate, neither of which serves democratic governance.

India’s central bank is often described as insulated. That insulation is real but bounded. The governor has a fixed term. Monetary policy is set by a committee with external members. Inflation targeting is anchored in statute. At the same time, appointments rest with the government, extraordinary directive powers exist in law, and control over the central bank’s surplus ultimately lies with the sovereign. Autonomy exists within political limits.

The same logic applies to the United States. The Federal Reserve’s legal independence remains intact. But sustained public attacks on its leadership weaken the norms that give that independence meaning. Central bank autonomy, in any system, rests as much on political self-restraint as on constitutional text.

The deeper democratic risk is not disagreement between institutions, but the erosion of the conditions under which disagreement is possible. When institutions are forced into alignment rather than allowed to differ, there is no independent judgement left to absorb shocks, and no trusted authority to manage trade-offs when crises arise. 

The test of a democracy is not whether its institutions agree, but whether they can disagree without being punished for it. Societies that weaken institutional judgement to solve immediate political problems often discover, when the next crisis arrives, that no credible referee remains. That is the warning embedded in the current American experience, and it is one that other democracies would do well to heed, before restraint quietly gives way to convenience.