Washington (AFP) – The Federal Reserve should avoid tackling politically-charged issues like climate change without Congressional approval if it is to maintain public trust in the institution, the head of the US central bank said Wednesday.
“Fed policymakers are often pressed to take a position on issues that are arguably relevant to the economy but are not within our mandate,” Fed chair Jerome Powell told a conference in California in prepared remarks. This includes issues like 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 US monetary policy and banking regulation. This allows policymakers to focus on keeping both inflation and unemployment low, leaving elected officials to chart America’s fiscal policy, and to tackle the more politically-sensitive topics like trade and climate change. The Fed should avoid “mission creep” in order to “maintain the public’s trust” in the institution, Powell said.
“Policies to address climate change are the business of elected officials and those agencies that they have charged with this responsibility,” he said, adding: “The Fed has received no such charge.”
“We are not, nor do we seek to be, climate policymakers,” he said. Powell’s remarks Wednesday underscore his push to keep the US central bank as far away as possible from US politics at a time when the country is deeply divided on a host of issues, from climate change to immigration.
With the US presidential elections looming later this year, the Fed risks being caught in the middle as it continues its long-running fight to return elevated inflation to its long-run target of two percent. Earlier Wednesday, Bloomberg News reported that US regulators, led by the Federal Reserve, had stepped in to thwart a European push to make climate risk a bigger focus of global financial rules.
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