Jerome Powell says Fed is undergoing 'stress test' with its credibility at risk
In his first public remarks since stepping down as the Federal Reserve chair, Jerome Powell issued a blunt warning that the central bank is undergoing a "stress test" and its credibility is at risk. During his remarks in accepting the John F. Kennedy "Profile in Courage" award on Sunday, Powell subtly shaded President Donald Trump without naming him for his attempts to exert control over the central bank's monetary decision-making and other independent institutions.
"Like many other institutions, the Fed has been undergoing a stress test," Powell read from his prepared text at the John F. Kennedy Presidential Library and Museum in Boston. He added that political interference could damage the Fed's longstanding credibility and the public's trust and hinder the central bank from making decisions in the best interest of Americans. "Congress wisely chose to insulate monetary policy decisions from political pressure," Powell said, adding, "These protections have served the public well, and administrations from both parties have respected them."
"If any administration finds a way to remove Fed officials over policy differences, then future administrations will do so as well. The public would lose faith that the central bank will make decisions based only on what’s best for all Americans," he warned.
While Powell did not specifically name the Trump administration, his remarks seem to be regarding the President's attempts to strong-arm the monetary policy in his second term. Powell, who stood up against lowering interest rates, was subject to a criminal investigation into his handling of the renovation of the Fed's historic headquarters building. While the case was later dropped, President Trump also attempted to fire Fed Governor Lisa Cook over allegations of mortgage fraud before her time at the central bank.
In his remarks, Powell further noted that both Fed officials and the public have a duty to "safeguard" the central bank's credibility, regardless of the surrounding political environment. "Partisan political differences are normal indeed essential in a thriving democracy. But we ought to be united in our commitment to the higher principles that define our nation. Chief among them is respect for the rule of law," the former Fed Chairman said.
At the end of his term on May 15, Powell did not leave the Fed as many of his predecessors chose to do, but remained in place indefinitely as one of seven Fed governors, denying President Trump the ability to fill the vacancy with a favorable candidate on the powerful board. While he said in his last address as the Fed Chair that he would keep a low profile in his new role, Sunday's speech signals that Powell will use the governor position to defend the institution's freedom against political pressure, in a situation that has not been seen in the past 75 years, according to Axios.
