Fending off Trump criticisms, Powell says political considerations ‘play no role’ in rate discussions

CCyB: 'Happy to use' when financial vulnerabilities call for it

The Federal Reserve will continue to go about its business and not be distracted by political considerations, the chairman of the central bank’s board said Wednesday in backing the independence of his agency.

He also said he supports use of the capital cyclical buffer (CCyB) – but at the right time under the right conditions.

Federal Reserve Board Chairman Jerome H. (“Jay”) Powell, in a press conference following the meeting of the rate-setting Federal Open Market Committee (which raised short-term interest rates by 25 basis points), that “political considerations play no role in our discussions” about setting interest rates.

Powell was responding to reporters’ questions about the impact on the FOMC of comments by President Donald Trump, who has recently hectored both Powell and the agency rate-setters about increasing interest rates. But Powell made it clear the committee – and the Federal Reserve – will keep going about its business.

“I’m not worried, because I know and everybody who works at the Fed knows we are going to continue doing our jobs they way we’ve always done them,” Powell said, responding to a reporter’s question about his concerns over Trump’s comments about Fed actions over interest rates.

(In the less-than-2-minute video, Federal Reserve Board Chairman Jerome Powell discusses how political considerations do not affect Fed rate-setting decisions.)

“That involves getting the best thinking together, diverse perspectives. Every FOMC cycle, we talk to hundreds of people from all different parts of society – not just business people and market people,” Powell said. “We get survey data from thousands of people. So, we really do have a broad exposure to what’s going on in all different parts of the country.”

Regarding the CCyB, Powell acknowledged that Gov. Lael Brainard has spoken out about invoking its use. However, he indicated its use was not yet required. “That’s a tool I’d be absolutely willing to use, and happy to use” at such time that financial vulnerabilities have reached a point where it is necessary.

He said the board will likely consider that test early next year. However, he noted he recently gave a speech in which he said financial stability vulnerabilities right now are roughly moderate. “But I would want to leave my mind open on that,” he said.