Independence of the nation’s central bank from direct political control is an important feature that has served the country well, the chairman of the bank’s board said Tuesday.
Speaking during a question and answer session at a conference sponsored by the Council on Foreign Relations in New York, Federal Reserve Board Chair Jerome H. (“Jay”) Powell defended the independence of the Fed, particularly in light of consistent, recent criticism of the Fed and Powell’s leadership by President Donald Trump.
“Other central banks have that in other countries,” Powell said, referring to the same or similar level of independence from direct political control. “When you see central banks lacking that, you see bad things happen,” he said.
Powell echoed past statements he has made that the Fed is “strictly non-political,” doing its best to “serve all Americans with our tools. We understand we have an important role; we desire no role on political issues,” he said.
Perhaps in answering criticism from Trump, Powell acceded that members of the Federal Reserve Board are human and will make mistakes (although he didn’t offer any details), adding, “although I hope not frequently.”
“But we won’t make them (mistakes) of integrity and character,” Powell said.
Earlier, in prepared remarks before the Q&A session, Powell noted that the Fed is insulated from short-term political pressures— “what is often referred to as our “independence,” he said.
“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests,” he said. “Central banks in major democracies around the world have similar independence.”
The Fed chairman noted that independence is at the heart of the board’s latest efforts to improve communications about its actions, and accountability, through special “listening session.”
“Along with this independence comes the obligation to explain clearly what we are doing and why we are doing it, so that the public and their elected representatives in Congress can hold us accountable,” he said. “But real accountability demands more of us than clear explanation: We must listen.”