Powell reiterates need for Fed’s political independence

Fed Chair Jerome Powell said that stabilizing prices requires making tough decisions that can be unpopular politically. Powell on Tuesday emphasized the need for the central bank to be free of political influence while it tackles persistently high inflation.

Powell’s speech did not contain any direct clues about where policy is headed for a Fed that raised interest rates seven times in 2022, for a total of 4.25 percentage points, and has indicated that more increases likely are on the way this year.

In a speech delivered to Sweden’s Riksbank, Powell noted that stabilizing prices requires making tough decisions that can be unpopular politically.

“Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” the chairman said in prepared remarks.

“The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors,” he added.

Powell’s remarks came at a forum to discuss central bank independence and were to be followed by a question-and-answer session.