Powell speech: We are not and will not be a climate policymaker

While speaking at Riksbank’s International Symposium on Central Bank Independence, FOMC Chairman Jerome Powell said the Federal Reserve’s independence from political influence is central to its ability to battle inflation, as reported by Reuters. Powell further noted that this independence requires the Fed to stay out of issues like climate change that are beyond its congressionally-established mandate.

“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.

“Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections,” he said. “But without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a ‘climate policymaker.’” “Decisions about policies to directly address climate change should be made by the elected branches of government and thus reflect the public’s will as expressed through elections,” he said. “But without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a ‘climate policymaker.’”

The 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.

“Fed must resist the temptation to broaden its scope to address other important social issues.”

“Taking on such goals would undermine our independence.”

“Fed has narrow responsibilities regarding climate-related financial risks.”

“Without congressional laws, inappropriate for us to use our monetary or supervisory tools to promote a greener economy.”

“Also inappropriate for us to use our tools to achieve other climate-based goals.”