Two senior Federal Reserve (Fed) officials yesterday praised the independence of the US central bank, amid concerns that President-elect Donald Trump will try to influence Fed policy.
The defense was led by Fed Chairman Jerome Powell, who said at a conference in Dallas, Texas, that rate decisions “cannot be reversed by any other part of the government, except, of course, Congress.” .
Congress created the Fed System more than a century ago and later gave it a dual mandate: to address inflation and unemployment without political interference, primarily by raising or lowering interest rates.
Powell’s praise echoed that of his colleague, the governor, Adriana Kugler, who previously noted, at an event in Uruguay’s capital, Montevideo, that “central bank independence is fundamental to achieving good policies and good results.” economic”.
Analysts have expressed concern that the Fed’s independence will come under strain in the incoming Trump administration, given the views expressed by the President-elect.
Trump is a fierce critic of Powell (whom he first nominated to head the US central bank), accusing him without evidence of supporting Democrats and once even questioning whether he was a bigger enemy than Chinese President Xi Jinping.
Trump has also said he has “better instincts” about the economy than many Fed governors, and argued that the US president should have “at least” some say in setting interest rates.
Trump’s comments suggest he could influence interest rate decisions, something he currently cannot do without a change in the law.
“Congress created the Fed by statute and can do whatever it wants by statute (…) But our decisions cannot be reviewed by any other agency,” said Powell, who refused to confirm whether he will continue as Fed governor once he is elected. His term as President expires in May 2026.
“Without a doubt I will continue in office until the end of my term (…) And that is really all I have decided,” he stated.
The best major economy
During his remarks, Powell also addressed the health of the largest U.S. economy, praising its recent performance as the best of any major economy in the world.”
The U.S. central bank recently began cutting its key interest rate from a two-decade high, shifting its attention from fighting inflation to supporting the labor market as the pace of price increases has moderated.
There has been widespread anger over the cumulative impact of years of inflation, which has raised consumer prices by more than 20% since the start of the Covid-19 pandemic.
However, the economic facts today are clear, Powell said during an event in Dallas, Texas, noting that inflation is slowing toward the Fed’s long-term goal of 2%, the labor market is “solid” and economic growth remains resistant.
Powell noted that inflation, as measured by the Fed’s preferred inflation gauge, is “much closer” to the target but has not yet reached it.
“We are moving policy to a more neutral environment over time,” he said, referring to the level of long-term interest rates that keep both inflation and unemployment in check.
“But the path to get there is not predetermined,” adding that the Fed was in no rush to cut rates.
