Leadership shake-up looms over the Fed

Investors are largely looking past an expected interest rate cut by the Federal Reserve today to longer-term questions about monetary policy in the coming year, stubbornly above-target inflation, and the central bank’s independence.

The likely quarter-percentage-point reduction is largely driven by unease over a weak labor market, but nevertheless comes with the Fed’s preferred inflation measure at 2.8% — solidly above policymakers’ 2% target.

Analysts are concerned that if the central bank falls under the political sway of the White House, it could unnecessarily ease monetary policy and allow price rises to accelerate out of control; a decision to lower borrowing costs today could reinforce those fears. Some economists have suggested the bank is already “quiet quitting” its inflation mandate.