The independence of the nation’s central bank has served the public well, and the chairman of the bank’s board expects to continue his press conferences following meetings of interest rate policy-setting committees, he said Wednesday. He also said that negative interest rates are not yet being considered as a tool for monetary policy, although he did not rule it out for the future.
In a press conference following a meeting of the rating setting Federal Open Market Committee (FOMC), Federal Reserve Board Chairman Jerome H. (“Jay”) Powell said he continues to believe that independence of the Federal Reserve from direct political control has served the public well over time. Appearing to read from a prepared statement (in response to a reporter’s question), Powell said “I assure you that my colleagues and I will continue to conduct monetary policy without regard to political consideration.”
He said the board would make their best judgments based on facts, evidence and objective analysis “in pursuing our goals.”
“And that’s all I have to say about that,” he concluded.
Powell, who had just announced that the FOMC had cut interest rates by 25 basis points, had already come into the cross-hairs of frequent critic President Donald Trump, who said in a Twitter post that the Fed (and Powell) had “no guts, no sense and no vision.” He called Powell “a terrible communicator.”
Powell, in responding to the reporter’s question on those remarks (and earlier ones, where Trump called the Fed policymakers “boneheads”) said he would not comment. “I’m not going to change my practice of not addressing comments made by elected officials,” he said.
In other comments, Powell said “negative interest rates” (in which a bank pays the Fed to keep its reserves on deposit) are not “high on the list” of tools the Fed would consider should further tools be needed apply monetary policy. However, he did not completely reject their use. Trump has recently urged the Fed to begin using negative rates as a method of further stimulating the economy.
“Negative interest rates is something we looked at during the financial crisis and chose not to do,” he said. Instead, Powell said, the Fed chose to apply “aggressive forward guidance” (a Fed method of influencing market expectations of future levels of interest rates using their own forecasts) and large-scale asset purchases.
“Those were two unconventional monetary policy tools that we used extensively,” he said. “We felt that they worked fairly well.”
The Fed chairman said if the central bank finds itself in a situation similar to the financial crisis – “again, that’s not something we are expecting” – then the Fed would look at using at large-scale asset purchases and forward guidance.
“I do not think we would be looking at using negative rates,” Powell said. “I don’t think those would be at the top of our list.”