What the Fed Runs—and What the President Doesn’t

By Somerset Advisory on April 16, 2025

Some things seem like they belong together—peanut butter and jelly, peas and carrots, the president and the economy. But not everything that looks connected actually is.

Take the Federal Reserve.

The Fed is our country’s central bank, and it wears a very specific hat: it sets interest rates and manages the money supply in an effort to keep the economy steady. What makes the Fed special—and often misunderstood—is that it’s independent. That means no president, no matter how persuasive, can call the chair of the Fed and tell them what to do.

It’s also centralized, meaning there’s a core decision-making team in D.C., but it gets input from twelve regional banks all across the country. It’s like a long dining room table with different perspectives brought together for one big job: balancing price stability, employment, and financial calm.

The goal of that structure, when it was designed over 100 years ago, was to give the Fed enough authority to act quickly when needed—but enough insulation to avoid becoming a political tool. That’s why it often sounds like the Fed is doing something beside the government, not with it.

But here’s the twist: while the president can’t control the Fed, government policies can still make its job harder. That’s where things get messy.

As we’ve mentioned, interest rates right now are sitting in a historically normal range—even if they feel high, especially compared to the near-zero rates we lived with for over a decade. What matters more than the number itself is whether that rate makes sense for where the economy is going. And right now, it’s going… slowly.

The Fed met a couple weeks ago and decided to hold rates steady. No big surprise. But the conversation behind that decision was telling: slower projected growth, higher-than-expected inflation (thanks in part to tariffs), and a decision to ease up slightly on shrinking the Fed’s balance sheet. They’re watching carefully, but not rushing in.

If the Fed is the grown-up in the room, they’re currently choosing to stay quiet—steadying the energy without adding to the noise.

More this week on what all this means for your money—and what it doesn’t.