The Federal Reserve in coming years will probably become highly politicized and thus lose its quasi-independent status. This is because of past shortcomings in its policies and, more importantly, of difficult decisions that face it in the year just ahead.

To be sure, the Fed has never been fully independent of the political process, and it shouldn't be. The president appoints the chairman and the governors of the Federal Reserve Board, and Congress must approve these appointments. With the chairman...