Cato Podcast Reforming the Federal Reserve, Brick by Brick
Feb 3, 2026
Jai Kedia, a Cato research fellow focused on monetary policy and payments, and Norbert Michel, Cato’s monetary and regulatory expert, unpack what the Fed actually controls and how its role expanded. They discuss limits of interest-rate tools, quantitative easing’s permanence, Congress’s role in mission creep, and practical reforms and alternatives to the dollar.
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Fed Influences But Does Not Control The Economy
- The Federal Reserve does not control the economy; it only influences price stability and employment within limits set by markets.
- Norbert Michel stresses the Fed's mandate contrasts with its many roles like bank regulation and last-resort lending that create mission creep.
Mission Creep Has Expanded The Fed's Roles
- Markets, millions of buyers and sellers, determine output and prices; the Fed only influences specific parts.
- Jai Kedia and Norbert note mission creep: Fed now runs regulation, payments, research beyond monetary policy.
Congressional Spending Limits Fed Effectiveness
- Fiscal policy constrains monetary policy: excessive congressional spending weakens the Fed's ability to control inflation.
- The podcast describes fiscal dominance where Congress' deficits make the Fed's job harder or ineffective.