Powell Says Fed Deserves Credit for Economic Growth

DALLAS — Jerome H. Powell, the chairman of the Federal Reserve, on Wednesday countered President Donald Trump’s loud and repeated attacks on the Fed without mentioning Trump by name.

Powell hammered on two simple themes during an hourlong question-and-answer session in front of several hundred people at the Federal Reserve Bank of Dallas.

The Fed is doing its job, he said, and the economy is doing really well.

“I’m very happy about the state of the economy now,” Powell said. “There’s pretty good reason to think we’re going to continue in a positive vein like that.”

He added that the Fed deserved credit for its role in the long and steady expansion.

“Our policy is part of the reason the economy is in such a good place now,” he said.

Trump has repeatedly attacked the Fed for raising interest rates too quickly, describing the central bank as “crazy,” “loco,” “going wild” and “out of control.”

Asked about those attacks, Powell did not respond directly. Instead, he made a point of saying twice that Congress is the Fed’s overseer.

“Our accountability is really to Congress,” he said, driving home the Fed’s independence from the executive branch. Independence from presidential criticism has long been a hallmark of the Fed’s existence, and a contributor to its ability to maintain monetary policy that aims to keep inflation stable and the economy running at maximum employment.

He returned to the same theme later in the evening.

“We have a very important job that Congress has assigned us and we have the tools to do it,” he said. “We’re just trying to do our jobs and we’re doing fine.”

Powell answered questions posed by the Dallas Fed president, Robert S. Kaplan, and from members of the audience. Most of those who asked questions said they worked in financial services and asked about the economic outlook, the Fed’s plans and regulatory policy.

Powell acknowledged signs that global growth might be slowing, but played down concerns about volatility in equity markets, describing stock prices as “one of many factors” the Fed evaluates in making policy decisions.

He said the Fed was hearing a “rising chorus of concern” from businesses about the effect of the Trump administration’s trade restrictions. Trump has imposed tariffs on steel and aluminum and on a wide range of Chinese imports, and those actions have prompted retaliation by America’s trading partners on goods like metals, peanut butter and whiskey.

Powell cautioned that the Fed still sees little evidence of a broad impact from the trade war in the economic data, but he said the concerns about protectionism made sense in theory.

“If it winds up, perhaps inadvertently, in a place where we have more widespread protection, that would be bad for our economy,” he said. “To the extent that more and more products are subject to tariffs you could see a little bit higher inflation and a little bit slower growth.”

He also said the Fed was well aware the benefits of the economic recovery have not been distributed evenly and there are pockets of America that have yet to rebound from the recession.

“We know there are a lot of people around the edges who have not benefited yet from the recovery,” Powell said. “The best thing we can do is to try to sustain this expansion for as long as possible.”

But he said there was a broad consensus among Fed officials that the central bank should keep raising its benchmark interest rate in the near term.

The Fed raised the rate in September to a range between 2 and 2.25 percent.

Investors expect an increase of one-quarter of a percentage point at the Fed’s next meeting, in December, although the recent volatility of financial markets has created a little uncertainty. Asset prices on Wednesday implied about a 73 percent chance of a December rate increase, according to the CME Group.

The Fed also is expected to continue raising rates during the first half of 2019.

“It wouldn’t be surprising to me that we would need to go up again in December and at least a couple of times next year,” Mary Daly, the new president of the Federal Reserve Bank of San Francisco, said in an interview with Bloomberg News on Monday.

Powell did not comment on the timing of future rate increases, but his upbeat economic outlook is consistent with expectations that the Fed will continue to raise rates.

Powell has announced he will hold news conferences after each of the Fed’s eight policymaking meetings next year, replacing the current pattern of quarterly news conferences. In recent years, the Fed has fallen into a pattern of announcing policy changes at meetings with a news conference. Powell said Wednesday that the Fed was reclaiming its ability to act at every meeting.

“The market is going to have to get used to that,” he said. “Certainly all meetings are live now. There’s no question about it now. I think over time folks will get used to the idea that we can and will move at any meeting.” Asked for closing thoughts, Powell returned to his two themes.

“I want to leave on a note of optimism about our economy,” he said. “We’ve been through a difficult time and we’ve faced difficult times before. We’re in a good place now. I do believe our economy can grow and grow faster.”

And, he added, the Fed is doing a good job.