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A report from The Manhattan Institute titled Reform the Federal Reserve’s Governance to Deliver Better Monetary Outcomes critiques the Fed's current structure, which allegedly limits its effectiveness. Dan Katz, Manhattan Institute adjunct fellow and former Treasury Department senior advisor, co-authored the report. He joins Yahoo Finance to discuss how the Fed's influence extends beyond monetary policy, outlining possible structural reforms.

Katz explains that the Central Bank has little accountability because the Fed is insulated from politics by design, contributing to monetary policy errors in recent years. But the Manhattan Institute adjunct fellow claims responsible decision-making can be incentivized: "Adopting, for example, a policy rule like a Taylor Rule or curtailing the Fed's scope of action ex-ante, we think would actually be a very big mistake. Because you do need real people in the room debating ideas and trying to make the best of an uncertain future. What we focus on in the report is trying to create better incentives for decision-making of the Fed by relying on checks and balances, and also by injecting additional accountability. "

Katz goes on to suggest the shortening of the Board of Governors' terms and "cooling-off periods" before returning to service in the executive branch to "reduce the incentives for politicized decision-making." 

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Editor's note: This article was written by Nicholas Jacobino