Powell Defends Federal Reserve Independence | Global News Avenue

As federal agencies prepare to hand over the keys to President Donald Trump’s second administration, one top official isn’t worried about losing his job: Federal Reserve Chairman Jerome Powell.

speak at the meeting new york times At Wednesday’s Dealbook conference, Powell dismissed suggestions that the new Trump administration would influence Fed policy decisions or that the president-elect could remove him from his leadership role.

Trump threatened to fire Powell as early as his first administration and more recently suggested the president should take a direct role in setting Fed policy. monetary policy. Both measures would undermine the central bank’s image as a steward of the economy, far removed from political fray.

What are the rules surrounding the Fed’s independence?

By law, the president appoints Fed chairs to four-year terms and cannot fire them without just cause. Trump appointed Powell in 2018 and Joe Biden appointed him to start a second term in 2022. Fed officials believe central bank’s isolation from politics is important for its credibility Therefore, it has the ability to control inflation while preventing a collapse of the job market.

“We should achieve maximum employment and price stability for the benefit of all Americans and stay completely out of politics,” Powell said. “I think this set of ideas is very, very widespread in Congress, in both political parties, on both sides of the aisle. “That’s what really matters. It’s the law of the country. I’m not worried about the risk of us losing our statutory independence because I do think people believe in these ideas.”

Powell also vetoed another Trump proposal Treasury Secretary Candidate Scott Bessant.

In an interview with Barron’s in October, Bessant said that the president may nominate the next Fed chairman in advance, creating a “shadow Fed chairman” whose statements on monetary policy will be more influential in financial markets than the current chairman. Greater influence because investors can take cues from the Fed’s decisions. Forward Guidance from the Federal Reserve.

Powell dismissed the possibility of such a move,

“I don’t think that’s even on the table,” he said. “There is an institutional relationship between the Fed and every administration. I fully expect that we will have the same general relationship.”