The U.S. Federal Reserve should avoid tackling political issues such as climate change without congressional approval if it wants to maintain public confidence in the institution, the head of the U.S. central bank said Wednesday.
“Fed policymakers are often pressured to take a position on issues that are undeniably about the economy but are outside of our mandate,” Fed Chairman Jerome Powell told a conference in California in prepared remarks.
This includes issues such as tax and spending policies, immigration policy and climate change, he said.
The Fed operates independently of Congress, which has granted it limited powers to set U.S. monetary policy and banking regulations.
This allows policymakers to focus on keeping both inflation and unemployment low, leaving elected officials to set America’s fiscal policy and deal with more sensitive political issues like trade and climate change.
US Fed official predicts higher long-term interest rates
The Fed should avoid “mission creep” in order to “maintain public confidence” in the institution, Powell said.
“Policies to address climate change are a matter for elected officials and those agencies charged with that responsibility,” he said, adding, “The Fed has received no such charge.”
“We are not, nor do we seek to be, climate policy makers,” he said.
Powell’s remarks on Wednesday underscored his push to keep the U.S. central bank as far removed from U.S. politics as possible at a time when the country is deeply divided on a range of issues from climate change to immigration.
With the US presidential election looming later this year, the Fed risks being caught in the middle as it continues its long-running struggle to bring elevated inflation back to its long-term target of 2%.
Gold hits new record high on Fed rate cut bets
Earlier on Wednesday, Bloomberg News reported that US regulators, led by the Federal Reserve, had stepped in to prevent a European push to make climate risk a bigger focus of global financial rules.
Source: AFP