Independent policy will solve problems of inflation-Powell
2023.01.10 09:16
Independent policy will solve problems of inflation-Powell
By Tiffany Smith
Budrigannews.com – According to Fed Chair Jerome Powell on Tuesday, the Federal Reserve’s independence from political influence is crucial to its ability to combat inflation. However, this independence also requires the Fed to avoid issues like climate change that go beyond its mandate established by Congress.
“As we raise interest rates to slow the economy, restoring price stability when inflation is high may necessitate measures that are unpopular in the short term. “We are able to take these necessary measures without considering short-term political factors because we do not have direct political control over our decisions,” Powell stated in prepared remarks to a forum on central bank independence sponsored by the Swedish central bank.
Powell, on the other hand, stated that “we should’stick to our knitting’ and not wander off to pursue perceived social benefits that are not closely linked to our statutory goals and authorities.” The case for our independence would be undermined if we took on new objectives, no matter how noble they may be.
According to Powell, a federal law that mandates the Fed to maintain maximum employment and stable prices embodies the need for the U.S. central bank to manage inflation through interest rates and other policy.
“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals,” Powell stated, despite the fact that the Fed’s bank regulatory powers grant it the responsibility of ensuring that financial institutions are aware of the potential risks they face from climate change. We will not be a “climate policymaker” in the future.
He stated at the Stockholm forum, “Decisions about policies to directly address climate change should be made by the elected branches of government and reflect the public’s will as expressed through elections,” reiterating principles he has previously laid out when questioned about the central bank’s approach to climate change by elected officials or the general public.
Powell’s position on the subject is in contrast to major European central banks’ efforts to incorporate green economy initiatives into policymaking.
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However, it also acknowledges the political realities of the United States, where elected officials’ opinions are more polarized. Even for their efforts to include climate-related considerations in its oversight of the financial system, Powell and the Fed as a whole have been harshly criticized by Republicans, who currently hold control of the U.S. House of Representatives.
