Fed chair­man receives bi­par­ti­san back­ing

Houston Chronicle - - BUSINESS - By Christo­pher Ru­gaber

WASHINGTON — Repub­li­can and Demo­cratic sen­a­tors voiced strong sup­port for an in­de­pen­dent Fed­eral Re­serve dur­ing a hear­ing with Jerome Pow­ell, one day af­ter Pres­i­dent Don­ald Trump launched an­other at­tack di­rected at the Fed chair­man on Twit­ter.

“Stay in­de­pen­dent,” Sen. John Kennedy, a Repub­li­can from Louisiana, told Pow­ell dur­ing Wed­nes­day’s hear­ing. “I think you’re do­ing a great job. All of us in pol­i­tics are go­ing to give you ad­vice, but call ’em as you see ’em.”

The sup­port from mem­bers of the Sen­ate Bank­ing Com­mit­tee sug­gests Trump’s at­tacks on Pow­ell and the Fed have found lit­tle trac­tion among mem­bers of his own party on Capi­tol Hill.

Pow­ell has made nu­mer­ous vis­its to Sen­ate and House mem­bers’ of­fices since be­ing ap­pointed chair­man by Trump in Fe­bru­ary 2018.

Trump has called Fed of­fi­cials “bone­heads“and ar­gued that the cen­tral bank should cut in­ter­est rates fur­ther. The Fed’s bench­mark rate cur­rently is in a his­tor­i­cally low range of 1.5 per­cent to 1.75 per­cent.

Sen. Mark Warner, Demo­crat from Vir­ginia, said many other govern­ment in­sti­tu­tions are “un­der as­sault” from the Trump ad­min­is­tra­tion, cit­ing White House at­tacks on in­tel­li­gence agen­cies and tur­moil at the Justice Depart­ment over the pros­e­cu­tion of Trump’s as­so­ciate Roger Stone.

Warner said that if Pow­ell were to “see any ef­forts made to un­der­mine the Fed’s in­de­pen­dence that you make us aware of that.”

“The Fed’s in­de­pen­dence is more im­por­tant than ever at this point,” Warner added.

Other sen­a­tors, in­clud­ing Mike Rounds, Repub­li­can from South Dakota, and Democrats Jon Tester from Mon­tana and Jack Reed from Rhode Island ex­pressed sim­i­lar sen­ti­ments.

The com­ments came on the sec­ond day of Pow­ell’s semi­an­nual ap­pear­ances be­fore Congress. On Tues­day, he tes­ti­fied be­fore the House Fi­nan­cial Ser­vices Com­mit­tee, when Trump crit­i­cized him.

Trump tweeted Tues­day that the Dow was fall­ing as Pow­ell spoke “as usual,” and said in­ter­est rates in the U.S. were too high.

Trump re­peat­edly has pub­licly crit­i­cized the Fed chair­man since an­nounc­ing he had nom­i­nated Pow­ell in 2017, a break from re­cent tra­di­tion. Pre­vi­ous pres­i­dents have pres­sured the Fed pri­vately.

Pow­ell told both com­mit­tees the U.S. econ­omy is in gen­er­ally solid shape, hav­ing weath­ered the head­winds last year stem­ming from the U.S.-China trade war and slower over­seas growth. The un­em­ploy­ment rate is near half-cen­tury lows, Pow­ell said, and busi­nesses in­creas­ingly are will­ing to hire work­ers with in­suf­fi­cient skills and train them.

“There’s no rea­son why it can’t go on,” Pow­ell said Wed­nes­day. “There is noth­ing about this econ­omy that is out of kil­ter or im­bal­anced.”

Still, China’s vi­ral out­break re­mains a threat to the U.S. econ­omy that the Fed is mon­i­tor­ing closely, Pow­ell said.

“We do ex­pect there will be some ef­fects“on the U.S. econ­omy, Pow­ell said, but added that it’s too early to spec­u­late on the im­pact.

Econ­o­mists at Gold­man Sachs es­ti­mate that the coro­n­avirus, along with the shut­down of Boe­ing’s pro­duc­tion of its trou­bled 737 Max air­craft, could re­duce eco­nomic growth by three-quar­ters of a per­cent­age point in the first three months of this year. But growth likely would bounce back and make up for some of the slow­down by the sec­ond half of the year, Gold­man said.

Pow­ell also de­fended the Fed’s in­tel­lec­tual open­ness and di­ver­sity af­ter be­ing ques­tioned by Sen. Rounds, who asked about “group think” at the Fed.

“It’s crit­i­cal to have di­verse per­spec­tives,” Pow­ell said. “But I re­ally think we do though. We have had plenty of dis­sent at the Fed over the years.”

The ques­tion was likely a pre­view of the de­bate that may take place over one of Trump’s re­cent nom­i­nees for the Fed Board of Gov­er­nors, Judy Shel­ton.

Shel­ton sup­ports a range of unortho­dox views on mon­e­tary pol­icy and has ques­tioned whether the Fed should be in­de­pen­dent of the White House.

A hear­ing on her nom­i­na­tion is sched­uled for to­day.

The Fed cut its bench­mark in­ter­est rate three times last year to its cur­rent range of 1.5 per­cent to 1.75 per­cent, his­tor­i­cally a very low level, to off­set the drag from a weaker global econ­omy and to push in­fla­tion higher.

An­drew Harrer / Bloomberg

Just a day ear­lier, Fed Chair­man Jerome Pow­ell was at­tacked on Twit­ter by Pres­i­dent Don­ald Trump.

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