Federal Reserve Chairman Jerome Powell said Wednesday that the central bank won’t take politics into consideration as it makes economic decisions, after several days of being pressured by President Trump on Twitter.
“Political considerations play no role whatsoever in our decisions about monetary policy,” said Powell, who added that the Fed’s decisions on its baseline lending rate will continue to be based “solely on best information and analysis.”
“We’re going to make the best decisions we can,” regardless of politics, he said. Powell added that he’s not worried about Trump’s tweets interfering with the way the Fed communicates, or whether the central bank could be seen by markets and businesses as losing independence.
Powell spoke soon after the Fed ignored Trump’s social media plea not to raise interest rates, and raised them up another quarter-point to 2.5 percent.
On the economy, Powell said the Fed sees “moderating” growth next year, and warned that more “crosscurrents” could prevent the U.S. economy from growing at President Trump’s goal of 3 percent per year.
Still, the Fed sees a healthy economy that will grow at 2.3 percent next year, although it thinks growth will fall to 2 percent in 2020.
“We see growth moderating ahead,” Powell said. While he said 2018 was the “strongest year since the financial crisis,” Powell said businesses appear to be slowing their investments due to uncertainty.
The Fed has identified various factors, including trade wars between the U.S. and other countries, particularly China, the United Kingdom’s anticipated exit from the European Union, and debt concerns within the EU as potential risks worth monitoring next year.
Powell downplayed the direct effect of Trump’s tariffs on the economy, but acknowledged that this and other factors could have secondary effects on businesses.
“It’s a mood of angst for growth going forward,” said Powell. “That mood is out there. That doesn’t mean that it will come into the data in a big way.”
Still, Powell downplayed the risk of another financial crisis, which another member of the Fed’s board, Lael Brainard, thinks is growing.
When asked whether the Fed should use its power to raise the amount of capital banks must hold to brace themselves for an economic downturn, Powell said he saw threats to the financial system as “moderate,” and did not think the Fed needed to raise that requirement yet. But he said he would keep an open mind as the Fed plans to meet early next year to reconsider that possibility.
