During the 1980s, under the leadership of Chairman Paul Volcker, the Fed further established its credibility and independence by taking the necessary steps to bring inflation under control. As in Mexico, the benefits of central bank independence in the United States have included low inflation, well-anchored inflation expectations, and increased policy credibility, which contribute to a more stable overall economic environment.
Indeed, during the recent financial crisis and the ensuing recession, the Fed has been able to take aggressive monetary policy actions to help stabilize the economy without dislodging longerterm inflation expectations. We should recognize, though, that in democratic societies, central bank independence must be accompanied by accountability to the public and its representatives. In this regard, transparency is key.