by Lindsay Dunsmuir and Howard Schneider
STOCKHOLM, Jan 10 (Reuters) – The US Federal Reserve’s (Fed) independence from political influence is essential to its ability to fight inflation, and that requires it to stay away from issues such as climate change, which are outside its scope. congressional mandate, US central bank president Jerome Powell said on Tuesday.
“Restoring price stability when inflation is high may require measures that are not popular in the short term as we raise interest rates to slow the economy. The lack of direct political control over our decisions makes it possible to take these necessary measures regardless of short-term political factors,” he said in a statement prepared for a conference on central bank independence organized by the Bank of Sweden.
But “we must stick to our model and not get bogged down in seeking perceived social benefits that are not closely tied to our statutory purposes and powers,” he added.
“Tackling new objectives, however laudable, without a clear statutory mandate would weaken the case for our independence,” he continued.
The need for the US central bank to manage inflation through interest rates and other policies is “well understood and widely accepted,” he said.
Jerome Powell recalled that this is sanctioned by a federal law which entrusts the Fed with the mission of promoting employment as much as possible and keeping prices stable.
For Jerome Powell, even though the Fed’s banking regulatory powers give it a role in ensuring that financial institutions understand the potential risks they face from climate change, “without explicit legislation from Congress, it would be inappropriate for US banking to use its monetary policy or surveillance tools to promote a greener economy or to achieve other climate-related goals”.
We are not and will not be a “climate decision maker,” said Jerome Powell.
“Decisions on policies to directly address climate change should be made by elected public bodies and therefore reflect the will of the people expressed in the polls,” he said.
Jerome Powell’s stance on the issue contrasts with that of major European central banks, which have built green economy goals into their policies.
The Fed chairman admits, however, that political leaders are more divided on the issue on the other side of the Atlantic.
(Report Howard Schneider; French version Claude Chendjou, edited by Blandine Hénault)
