WASHINGTON (AP) — Chairman Jerome Powell said Wednesday that the Federal Reserve’s ability to set interest rates without political interference is necessary so it can make decisions that serve “all Americans” rather than ‘a political party or a specific outcome.
Speaking at the New York Times DealBook Summit, Powell responded to a question about President-elect Donald Trump’s many public criticisms of the Fed and of Powell himself.
“We are supposed to achieve maximum jobs and price stability for the benefit of all Americans and stay completely out of politics,” Powell said.
The Fed chairman expressed confidence in Congress’ overwhelming support for maintaining the central bank’s independence.
“I have no fear,” he said, “that there is a risk that we will lose our statutory independence.”
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On interest rates, Powell said the Fed can afford to cautiously cut its benchmark rate because the economy remains strong and inflation has fallen from its peak two years ago.
The Fed aims to achieve a “soft landing” for the economy, whereby the central bank’s interest rate hikes would manage to reduce inflation to its 2% target without causing a recession. History has shown that this is a rare and difficult feat.
Yet the economy appears largely on track to achieve such an outcome. The job market has slowed. And inflation is falling sharply, although in recent months it has remained slightly above the Fed’s target, which could make policymakers reluctant to cut rates further.
Several other Fed officials said this week they plan to cut rates further, without committing to a cut at their next meeting later this month.
On Monday, Christopher Waller, an influential member of the Fed board, said he was “leaning” toward cutting rates when the central bank meets in two weeks. Waller added, however, that if upcoming inflation or hiring data looks worse than the Fed is forecasting, he might favor keeping rates unchanged.
On Tuesday, Mary Daly, president of the San Francisco Federal Reserve, said she favored another rate cut, without commenting specifically on a timetable.
“Whether it’s in December or some time later, that’s an issue that we’ll have an opportunity to debate and discuss at our next meeting,” Daly said in an interview on Fox Business News. “But the fact is we need to maintain a downward policy to accommodate the economy because we want a sustainable expansion with low inflation.”