Cutting interest rates by half a percentage point was not action taken after political pressure was applied, the chair of the Federal Reserve Board indicated Tuesday, but was based on what the agency’s rate-setters believed was the best approach for the agency to take on monetary policy in addressing the coronavirus’ spread and the impact of that on the economy.
In a press conference following action taken by the Federal Open Market Committee (FOMC) to reduce the target range for the federal funds rate by half a percentage point, FRB Chair Jerome H. (“Jay” Powell) said the committee took the action “to help the U.S. economy keep strong in the face of new risks to the economic outlook,” especially that posed by the spread of the virus worldwide.
During the press conference, in response to a reporter’s question if there was any political pressure to make the move (particularly after President Donald Trump tweeted early in the day in support of a “big rate cut” by the Fed along the lines taken by some other central banks around the world), Powell indicated that politics had nothing to do with the decision.
“It’s very important that people understand that we will always make our decisions based on the best thinking that we have, based on what we learn from our outreach to business, non-profits, educational institutions that we get every cycle through the Reserve banks – and the best analysis, the best research,” Powell said. “We are always going to make our decisions in the interests of the American people to carry forward and try to achieve the mandates that Congress has given us.
“And we are never (sweeping his right hand for emphasis) going to consider any political considerations whatsoever. We will not do that, and it’s very important that the public understands that,” Powell concluded.
Regarding the spread of the virus, Powell acknowledged that “the ultimate solutions to this challenge will come from others, particularly health professionals.”
“We can and will do our part, however, to help keep the U.S. economy strong as we meet this challenge,” he said. “As always, our actions are guided by our Congressional mandate to promote maximum employment and price stability.”