Fed pick defends central bank’s role
Powell says Dodd-Frank can be eased, strongly hints at rate rise in Dec.
WASHINGTON — Jerome Powell, President Donald Trump’s pick to be chairman of the Federal Reserve, told senators at his confirmation hearing Tuesday that he believes some bank regulations can be rolled back — something the administration and Wall Street favor. But he stressed that he will protect the central bank’s political independence, calling it vital for the Fed’s role.
Powell also strongly hinted in his appearance before the Senate Banking Committee that the Fed would raise rates again in December.
Powell said he believed that the Dodd-Frank Act, passed in the wake of the devastating 2008 financial crisis, had made the financial system stronger, including ensuring that no major institution now is too big to fail. But in some areas such as regulation of smaller banks, the law had imposed unnecessary burdens, he said.
Powell’s comments pleased many GOP senators, who have complained that Dodd-Frank was hurting the economic recovery by making it harder to get bank loans. Democratic senators, however, pressed Powell to say whether he would cut key consumer protections in the 2010 law, a measure that Trump often attacked on the campaign trail as a disaster.
Powell stressed that he was “strongly committed” to the political independence of the Federal Reserve and that he has not had any conversation with anyone in
the administration that concerned him.
Powell said the Fed would continue on a gradual path of raising interest rates and shrinking the Fed’s massive $4.5 trillion balance sheet, which grew fivefold in the wake of the Great Recession as the Fed bought government bonds to push long-term interest rates lower.
On interest rates, Powell said, “I think the case for raising interest rates at our next meeting is coming together.” When pressed for specifics, Powell deferred, citing Fed policy not to talk about possible outcomes before officials gathered and heard all views.
Trump tapped Powell to succeed Yellen, whose term ends on Feb. 3. She said last week she will leave the Fed once Powell is confirmed by the Senate. On other topics:
Powell dodged questions posed by Democrats about whether it would be a wise move for Congress to boost budget deficits by $1.5 trillion over the next decade by passing tax cuts being pushed by Republicans and the Trump administration. Powell said the Fed would assess the impact of any tax cuts on the economy once the final package had won congressional approval.
He predicted that the economy would grow by 2.5 percent this year and around that level next year, considerably better than last year’s performance.