Fiscal Dominance and Fed Complacency SHARE In his first speech as a member of the Federal Reserve’s Board of Governors, Christopher Waller defended Fed independence and reassured his audience that “deficit financing and debt servicing issues play no role in our policy decisions and never will.” His goal was to dispel the “narrative” that, with massive federal debt and fiscal deficits, the Fed may become subservient to the Treasury. Large‐scale debt monetization could then lead to inflation and a loss of Fed independence. Waller was adamant that the Fed would not “succumb to pressures (1) to keep interest rates low to help service the debt and (2) to maintain asset purchases to help finance the federal government.” Despite his statement, there may be reason to fear fiscal dominance. As Harvard economist Greg Mankiw warns, “It would be a mistake to put too much faith in the prescience and skill of central bankers.”