Washington (United States) (AFP) – US Federal Reserve chief Jerome Powell said Wednesday that he plans to stay at the central bank as a governor after his chair term ends, as the independent institution battles legal challenges under the Trump administration. “After my term as chair ends on May 15, I will continue to serve as a governor for a period of time to be determined,” Powell told his last press conference at the helm of the Fed. He added that he plans to “keep a low profile as a governor” and will leave when he deems it “appropriate to do so” — an unusual though not unprecedented move. He can remain as a governor until 2028.
Powell stressed that his decision had nothing to do with verbal criticism by elected officials, but instead was linked to his worry over legal attacks on the institution. Since returning to power last year, President Donald Trump has frequently slammed Powell for not cutting interest rates more quickly, a policy that would boost economic activity but could fuel inflation. The US leader separately attempted to oust Fed governor Lisa Cook over mortgage fraud allegations, in a case that now stands before the Supreme Court. Trump’s Justice Department meanwhile opened a criminal probe into Powell and the Fed over renovation cost overruns, a move the central banker called a tactic to erode the Fed’s independence. The Justice Department has dropped that investigation into Powell for now, and the Fed chief said he was encouraged by recent developments. He added that he is monitoring the next steps in this process, reiterating that he would not leave the Fed until the probe is “well and truly over.” Powell also emphasized the need for a central bank that operates “free of political influence.”
On Wednesday, the Fed chairman congratulated his expected successor, Kevin Warsh, for clearing a key hurdle in a rocky confirmation process.
Powell’s remarks came shortly after an unusually divided Fed kept interest rates unchanged for a third straight meeting on high uncertainty from the Middle East war. “Inflation is elevated, in part reflecting the recent increase in global energy prices,” the central bank said in a statement. Its decision keeps rates at a range between 3.50 percent and 3.75 percent. But four out of 12 voting officials opposed the outcome, including governor Stephen Miran, who sought a quarter-point cut. Three Fed presidents — Beth Hammack, Neel Kashkari and Lorie Logan — backed the pause but not the Fed statement signaling an inclination toward interest rate cuts. This was the largest number of dissenting votes since 1992, and the divergence among officials will be closely watched with the central bank set to enter a new era.
The Fed has been on a path of rate cuts since late last year. But with the US-Israel war on Iran causing a surge in energy costs and snarling supply chains, analysts are monitoring whether inflation could prompt policymakers to consider instead the need for a rate hike. Powell told Wednesday’s press briefing that he expects Warsh to have the skills to forge consensus among the Fed’s voting members.
The Senate Banking Committee voted 13-11 to advance Warsh’s nomination earlier Wednesday, bringing him closer to confirmation by the full Senate. But Democrats on the Senate panel pushed back against the process, with lawmaker Elizabeth Warren charging that this would further the president’s “attempt to seize control of the Fed.” Georgia Senator Raphael Warnock warned that Warsh’s nomination had been “tainted by the real and persistent threats” Trump made to Fed governors, stressing the need for the bank’s independence. Republican Senator Thom Tillis on the banking panel initially vowed to block Warsh’s nomination if the investigation was not concluded. But with the Justice Department saying that it is dropping the probe, Tillis relented and backed Warsh in Wednesday’s vote.
On whether he believes Warsh would stand up to Trump, Powell said: “He testified very strongly to that effect in his hearing, and I’ll take him at his word.”
© 2024 AFP
