The Federal Reserve's independence from political influence is critical to its ability to fight inflation and in time also stay away from issues such as climate change that are outside its mandate, Fed Chairman Jerome Powell said on Tuesday.
"Restoring price stability when inflation is high can require unpopular measures in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary steps without regard to short-term political factors," Powell said.
However, the Fed must be firm on principle and not pursue social benefits that are not closely related to the goal, continued Powell. "Taking on new goals even if possible, without a clear statutory mandate will affect the workflow.'
There is a need for a U.S. central bank. managing inflation through interest rates and other policies. Although Powell said the Fed's bank regulatory powers give it a role to ensure financial institutions understand the potential risks they face from climate change, "without clear congressional legislation, it would be inappropriate for us to use monetary policy or our supervisory tool to promote a green economy”.
"Decisions on policies to deal with climate change should be made directly by the elected branch of government and thus reflect the will of the public as expressed through elections," continued Powell in reiterating the principles he had previously presented.
Powell's position on this issue contrasts with major central banks in Europe that have integrated green economic efforts into their policymaking.
