The US central bank should be independent and away from matters outside its powers to fight inflation

STOCKHOLM (Reuters) – Federal Reserve Chairman Jerome Powell said on Tuesday the bank’s independence from political influence is crucial to its ability to fight inflation, but that it requires it to steer clear of issues like climate change that go beyond its congressional mandate.
“Restoring price stability at a time of high inflation may require unpopular short-term measures, such as raising interest rates to slow the economy,” he said in a prepared speech at a government-sponsored forum on central bank independence. Riksbank. The lack of direct political control over our decisions allows us to take these necessary actions without regard to short-term political factors.”
But he added: “We must stick to our goals and not exhaust ourselves in the pursuit of perceived social benefits that are not closely related to our goals and legal powers … Adopting new goals, however worthy, without a clear legal mandate would undermine the cause of our independence”.
Powell said there is a “great understanding and broad acceptance” of the need for the US central bank to manage inflation by raising interest rates and other policies, which is embodied in a federal law mandating the bank to maintain maximum employment opportunities and price stability.
However, Powell said the central bank’s regulatory powers give it a role to ensure that financial institutions understand the potential risks they face from climate change and that “without explicit legislation from Congress it would not be fair for us to use our monetary policy or our supervisory tools to promote a green economy.” towards a larger scale or to achieve other climate-related goals. We are not and will not be responsible for climate policies.”
On the other hand, the Central Bank said in a statement yesterday that interest rates will be higher than its expectations last September. He expected the inflation rate to fall to 3.1% next year, compared to 5.6% this year, which means it is still higher than expectations last September, which were 2.8% and well above the target rate for the council, which is 2%.
The bank also lowered its forecast for US economic growth next year to just 0.5%, down from a 1.2% forecast last September.
On the other hand, Jamie Dimon, CEO of the American investment bank “J. with Me. Morgan Chase, that the US central bank may need to raise key interest rates to 5% or more, but prefers to postpone this step to assess the effects of interest rate hikes over the past year.
He explained in a television interview yesterday that there is a 50% chance of expecting interest rates to rise to around 5%, and another 50% chance of expecting interest rates to rise to 6%.
Damon added: “I’m on the side that believes this increase may not be enough, as we were a bit slow (in tackling inflation) until inflation shot up…However, I think it’s not there would be nothing wrong with waiting three or six months” before approving new increases.