‘Don’t Do It’: Fed Chair Powell Tells Successor to Stay Out of Politics

Federal Reserve Chair Jerome Powell defended the central bank’s independence and urged his successor to stay out of elected politics at a press conference announcing interest rates on Wednesday.

“Don’t get pulled into elected politics. Don’t do it,” Powell said in response to a question by CNN reporter Matt Egan.

“Our window into democratic accountability is Congress, and it’s not a passive burden for us to go to Congress and talk to people, it’s an affirmative, regular obligation,” Powell added. “If you want democratic legitimacy, you earn it by your interactions with our elected overseers, and so it’s something you need to work hard at, and I have worked hard at it.”

Powell’s comments come just weeks after he announced that the Justice Department had threatened him with criminal charges related to a multibillion-dollar renovation of the Fed’s historic office buildings. He said the grand jury subpoenas were political pressure to answer President Donald Trump’s calls to lower interest rates.

“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be set by political pressure or intimidation,” Powell said in a video statement earlier this month.

The Fed voted to maintain current interest rates at 3.5% to 3.75% in a widely expected decision Wednesday.

Powell repeatedly declined to answer reporters’ questions about the ongoing investigation, but was willing to speak in more general terms about the uncertainty looming over the Fed.

Powell emphasized that “every advanced democracy in the world” has established an independent central bank.

“The reason is that monetary policy can be used through an election cycle to affect the economy in a way that will be politically worthwhile,” Powell added.

Trump has tied his demands for lower interest rates to persistently high mortgage rates, amid a campaign to lower housing costs and win the messaging battle on affordability.

Steven Kamin, an economist who formerly headed the Federal Reserve Board’s international finance division, said on Wednesday that maintaining interest rates and defending the bank’s independence were simply what any economist worth their salt should have done.

“It is a sign of asserting that independence, insofar as the president wants lower rates, but it’s also a sensible thing to do,” said Kamin, a senior fellow at the conservative American Enterprise Institute.

“Those are standard, boilerplate answers. Almost all economists think central banks do a better job when they are independent of the political process,” he added.