Jay Powell said the Federal Reserve will not become a “climate policymaker,” as he offers a comprehensive defense of the independence of the US central bank from political influence.
In his remarks Tuesday, the Fed chair said the central bank must stay away from issues beyond its congressional mandate and instead maintain a narrow focus on keeping consumer prices steady. , promote a healthy labor market and ensure the safety of the country’s banking system.
“It is essential that we adhere to our statutory objectives and jurisdiction, and at the same time we resist the temptation to expand activities to address other important social issues of the day”.
“Without clear congressional legislation, it would be inappropriate for us to use monetary policy or our supervisory tools to promote a greener economy or to achieve other goals based on climate.”
He added: “We are not and will not be a ‘climate policymaker’.”
Republican lawmakers have accused raised about going beyond its mandate by pledging to consider climate-related financial risks, an area in which Mr. Powell said Tuesday that the central bank has “narrow, but important responsibilities.” important” associated with banking supervision.
“The public reasonably expects that supervisors require banks to understand and appropriately manage their material risks, including financial risk from volatility,” he added. climate.
In a panel that followed the remarks, Mervyn King, a former governor of the Bank of England, said central bank independence is a “great responsibility and it cannot be abused by trying to get enter areas not expressly authorized by the appropriate authority. Political Process”.
“I worry that people, with their enthusiasm for doing good, are actually putting central bank independence at risk,” he said of climate-related issues.
Republican senators last year blocked the appointment of Sarah Bloom Raskin, who was chosen by Joe Biden to lead banking oversight at the Fed, after disagreeing with her call for the agencies to proactively address financial risks associated with climate change.
Several other major central banks have advocated for expand their deposit to include climate risk control. Mark Carney, another former BoE governor, is a leading advocate of such a change, but it is also pushed by others, including the European Central Bank.
Powell on Tuesday said central bank independence is especially important if the Fed is to succeed in its fight to tame inflation, which is still at a multi-decade high.
“Restoring price stability in the face of high inflation may require measures that are uncommon in the short term as we raise interest rates to slow the economy,” he said. “The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”
Since March, the Fed has raised its key interest rate from near 0% to less than 4.5% and plans to further tighten the economy this year.
Democratic lawmakers have called on the central bank to withdraw its tightening plans, warning of unnecessary economic losses and excessive job losses.
“The tools that we have are working, and I think there’s nothing wrong with our mission,” Powell told the panel.
