Federal Reserve Governor Jay Powell spoke with Bloomberg’s Peter Cook following his speech at Catholic University today. Powell said that low inflation gives the central bank time to remain patient as it considers when to raise interest rates. He said, “There’s plenty of slack out there in the economy” and that “wages do not suggest any tightness in the labor market.”
Jay Powell interview highlights
*Jay Powell Says Fed Welcomes Transparency With Open Arms
*Jay Powell Says Audit Bill Threatens Performance of U.S. Economy
*Jay Powell Says January Jobs Report Was a Great Report
*Jay Powell Says Looking For Continued Progress On Inflation
*Jay Powell Says Inflation Is Too Low
*Jay Powell Says Wants To Be Confident Inflation On Path To 2%
*Jay Powell Says Patience Is Appropriate Term
*Jay Powell Says There Is Plenty Of Slack In U.S. Economy
*Jay Powell Says Fed Policy Will Be Data-Dependent
*Jay Powell Says Dollar Strength Partly Reflects U.S. Economy
*Jay Powell Says Fed Following Events In Greece Carefully
PETER COOK, BLOOMBERG NEWS: I am joined by Governor Jay Powell. Thank you for the time, rare opportunity for us to have a chance to chat with you. I want to ask you first of all about your speech today. You made a pretty strong argument against audit the Fed, the push that we’re seeing right now in Congress. The fact that you’re making this speech at all tells me that you and your colleagues at the Fed see this as a real threat right now.
JAY POWELL, MEMBER, BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM: So I really felt that I had to speak out. I feel very strongly that the bill is misguided and — and frankly mislabeled. It’s really not about a financial audit. People hear about it and they think, oh sure, auditing the Fed makes a lot of sense. The fact is we are financially audited. I would know that. I chair a committee that oversees the audits. This is about a Congressional policy investigation of monetary policy in real time, in a way that is very likely to interject short-term political considerations into the making of monetary policy.
COOK: You think the independence of the Fed is at stake with this debate?
POWELL: Well, I would say this is an incursion on the part of the Fed that needs to be independent. Most of the Fed is just like any other agency. Bank regulation doesn’t have any meaningful claim to independence any different from another federal agency. Monetary policy, for great historical reasons, has traditionally been insulated from short-term political pressures. And Congress did that in 1978. And the results have with — by eliminating the GAO’s right to audit monetary policy, the result has been much lower inflation, which has been under control for 30 years. To go back on that now, given the country’s financial challenges going forward, just makes no sense at all.
COOK: In your speech you did point out that what the Fed’s been up to the last couple years, unprecedented actions, the expansion of the balance sheet to $4.5 trillion, steps that you and others of the Fed have said made a difference in rescuing the U.S. economy. But at the same time those actions, because they were unprecedented, don’t they in and of themselves obligate the Fed in some way to some sort of review by Congress or by others? These were big steps.
POWELL: So these were unprecedented steps, and we absolutely welcome transparency with open arms, and accountability as well. I went through in my speech all of the ways in which we are transparent about monetary policy. We publish statements immediately after the meeting, we publish minutes that are highly detailed after that. We — the chair does press conferences. She gives speeches. I give speeches. The other governors do. We testify. We talk in public. Nothing the Fed does happens on monetary policy without the whole world watching. So the idea that there’s some secret thing happening is just — it’s just false. It’s in violent conflict with the facts.
COOK: Violent conflict with the facts. Right now the facts are, Governor Powell, you’ve got at least three potential Republican presidential candidates in the U.S. Senate alone who support audit the Fed, at least the concept of it. Are you worried the politics are running against the Fed right now?
POWELL: So I don’t hold myself out as an expert or commentator on politics. My approach is really just to state the facts and let people understand. And the most important thing they need to understand is that this is not about an audit. Everyone who hears this thinks, oh, of course the Fed should be audited. This is — this not that at all. And people who are expert in the area, people who follow this closely really understand that pretty uniformly.
This is about getting Congress into the meeting by meeting making of monetary policy. Over time we have learned that when that happens, inevitably elected politicians want more accommodative policy. It results in higher inflation and bad economic outcomes. Since the GAO exclusion was enacted in 1978 we’ve had lower inflation. It’s been under control. Why we would change that now is a mystery to me.
COOK: Are you and Chair Yellen going to make a concerted effort, others at the Fed to try and meet with members of Congress to satisfy their concerns? Can you beat this basically?
POWELL: So I speak only for myself, and this was my idea to — I put myself forward to do this because I feel really strongly about this. And, yes, I engage with elected members all the time. And I quite like doing it. I did it my prior lives as an appointee under President George H.W Bush. And I enjoy engaging with members. And so do the other governors of the Fed. We’re out there quite a lot. It’s part of our accountability and transparency to Congress. We are accountable. We are transparent. We embrace that. And so that’s part of that.
COOK: Final question on this before I ask you a little bit about the economy. Are you confident that if it were to pass in Congress that President Obama would stand up and veto this kind of legislation?
POWELL: So that’s a great question, but it’s really not one for me. Again, I don’t do the politics. I don’t hold myself out as understanding it. I’m going to address the merits. This is what I do. I’m just going to talk about the facts of what the bill is, the risks, the history. And I think it’s quite compelling. And my experience is if you put that out there, people of goodwill are going to get it and they’re going to see that this bill really threatens the performance of the U.S. economy and will be bad for the American people.
COOK: Let’s talk a little bit about the economy. We had a jobs report on Friday that was pretty good. I was there at the lockup at the Labor Department. How did that report, if it did, alter your own view about where the U.S. economy is right now?