The US Federal Government and the Federal Reserve Bank have a major conflict of interest: 100% of the profits which the Federal Reserve Bank makes above its operating expenses are by law, paid to the US Treasury. So it is in the Government's interest for the Federal Reserve to set its Federal Funds Interest Rate which it charges to lend to banks as high as the Federal Reserve will set it, from that viewpoint.
I think the provision in the law that directs Federal Reserve profits to be paid to the US Treasury is the single biggest flaw in the Federal Reserve Act. The profits should instead be destroyed, taking those dollars completely out of circulation. That would enable the Federal Reserve to more easily control inflation with smaller increases in the Federal Funds Rate than it currently has to use.
Under the current law, those dollars are simply transferred from the private sector to the government (public) sector of the economy, which doesn't remove them from circulation, so the only way higher interest rates reduce inflation is when the interest rates get high enough to disrupt the business models of enough businesses to cause the private sector of the US economy to contract.
All of the Federal Reserve Board members are intelligent enough to know all of this--but none of them have the balls to say it publicly.
