Chairman of the Federal Reserve Jerome Powell The central bank on Tuesday stressed the need to remain free of political influence as it tackles persistently high inflation.
In a speech to Sweden’s Riksbank, Powell noted that stabilizing prices would require politically unpalatable tough decisions.
“Price stability is the foundation of a healthy economy and provides immeasurable benefits to the public over time. But restoring price stability when inflation is high may require unpopular measures in the short term, such as raising interest rates to slow the economy.” The president said in prepared remarks.
“The lack of direct political control over our decisions allows us to take these necessary steps without considering short-term political factors,” he added.
Powell’s comments came at a forum to discuss central bank independence, followed by a question-and-answer session.
The speech contained no direct indications of where the central bank’s policy was headed Raised interest rates seven times In 2022, a total of 4.25 percentage points, and indicated that There are opportunities to increase This year.
Criticism of the Fed’s actions by elected leaders has often been done in hushed tones, with Powell facing vocal opposition from both sides of the Fed political aisle.
Former President Donald Trump has ripped the Fed for raising interest rates during his administration, while Sen. Progressive leaders like Elizabeth Warren, D-Mass, have criticized the current round of raises. President Joe Biden has largely resisted commenting on the central bank’s moves, while noting that tackling inflation is primarily the central bank’s responsibility.
Powell has repeatedly said that political factors did not weigh on his actions.
In another part of Tuesday’s speech, he addressed calls from some lawmakers for the central bank to use its regulatory powers to tackle climate change. Powell noted that the central bank should “stick to our knitting and not wander off to pursue social interests that are not tightly connected to our statutory goals and authorities.”
While the central bank is asking big banks to examine their financial preparedness in the event of major climate-related events such as hurricanes and floods, Powell said that’s a long way to go.
“Decisions on policies to directly address climate change should be made by elected branches of government and thus reflect the will of the public as expressed through elections,” he said. “But without clear congressional legislation, it would be inappropriate to use our monetary policy or supervisory tools to promote a green economy or achieve other climate-based goals. We are not, and will not be, a ‘climate policymaker.'”
The central bank will launch a pilot program this year calling on the nation’s six largest banks to participate in an “environmental analysis” aimed at testing institutions’ resilience during major climate events.
The exercise will take place in addition to so-called stress tests, which the central bank uses to test how banks will perform under a hypothetical economic downturn. Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo are participating firms.