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Chair Jerome Powell said Wednesday that the Federal Reserve’s ability to set interest rates free of political interference is necessary for it to make decisions to serve “all Americans” rather than a political party or a specific outcome.
Speaking at The New York Times’ DealBook summit, Powell spoke in response to a question about President-elect Donald Trump’s numerous public criticisms of the Fed and of Powell himself.
“We’re supposed to achieve maximum employment and price stability for the benefit of all Americans and keep out of politics completely,” Powell said.
The Fed chair said he was confident of widespread support in Congress for maintaining the central bank’s independence.
“I’m not concerned,” he said, “that there’s some risk that we would lose our statutory independence.”
On the topic of interest rates, Powell said the Fed can afford to cut its benchmark rate cautiously, because the economy remains sturdy and inflation has tumbled from its peak of two years ago.
The Fed has been aiming to deliver a “soft landing” for the economy, whereby the central bank’s interest rate hikes manage to help reduce inflation to its 2% target without causing a recession. History has shown it’s a rare and difficult feat.
Yet the economy appears largely on track for such an outcome. The job market has slowed. And inflation is down sharply, though in recent months it has remained stuck modestly above the Fed’s target, which could make the policymakers reluctant to cut rates much further.
