Fed Chair Powell Highlights Importance of Independent Fed by Christopher Rugaber May 25, 2018 – the Globe and Mail / the Associated Press

Fed Chair Powell Highlights Importance of Independent Fed by Christopher Rugaber May 25, 2018 – the Globe and Mail / the Associated Press

Fed Chair Powell highlights importance of independent Fed By Christopher Rugaber May 25, 2018 – The Globe and Mail / The Associated Press Federal Reserve Chairman Jerome Powell “I had a number of meetings over several warned Friday that the Fed’s independence months with a number of officials, including from political pressure must be respected if it is the president, and in no meeting, at no time, did to succeed in controlling inflation, maximizing I ever have any reason to question the employment and regulating the financial independence of the Federal Reserve,” Clarida system. said then. His remarks Friday came after Kevin Warsh, a The double-digit inflation of the late 1970s is former Fed official who President Donald often blamed, in part, on then-Federal Reserve Trump interviewed for the chairman post, said Chairman Arthur Burns, who was reluctant to in an interview earlier this month with Politico raise short-term interest rates high enough to that Trump did not appear to view the Fed as an choke off inflation for fear of causing massive independent body. He said Trump was direct unemployment. about how he thought interest rates should be Burns and other Fed officials were pressured by managed. President Richard Nixon, who was leery of any Powell, in a speech in Stockholm, warned political blowback from rising unemployment. against taking that independence for granted Inflation remained high into the early 1980s given its recent success in keeping inflation until Paul Volcker, appointed Fed Chair by low. President Jimmy Carter, pushed short-term “We must not forget the lessons of the past, interest rates to nearly 20 per cent. That sparked when a lack of central bank independence led a sharp recession, but it also reined in inflation. to episodes of runaway inflation and Powell spoke at a conference celebrating the subsequent economic contractions,” Powell 350th anniversary of the Riksbank, Sweden’s said in prepared remarks. equivalent of the Fed. Following Warsh’s comments regarding The Fed is also focused on making its actions Trump, members of the Senate Banking transparent, Powell said, in order to bolster Committee quizzed two of Trump’s nominees public support. That’s increasingly important at for the Federal Reserve Board, Richard Clarida a time when “trust in government and public and Michelle Bowman, about the importance of institutions is at historic lows,” he said. Fed independence. Research has shown that an independent central Both said yes when asked by Sen. Sherrod bank typically does a better job regulating Brown, D-Ohio, whether they thought it was banks and the broader financial system, Powell important for the Fed to remain free from White said. House influence. Clarida said that neither Trump nor any other member of his “There can be no macroeconomic stability administration had said anything during his without financial stability,” he said. interviews that would be compromising to the Fed’s independence. .

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