Federal Reserve Chair Jerome H. Powell has been quietly building support on Capitol Hill to protect the central bank’s independence as President Trump has increasingly pilloried the Fed and Powell for what he calls “crazy” actions that imperil the economy.
With escalating rhetoric, Trump has said he wants to pressure Powell to keep interest rates low, breaking with years of presidential restraint in avoiding comment on Fed policy.
But while Trump has been able to rally Republicans to his cause on many issues, Powell appears to have successfully built a base of key backers on Capitol Hill. Top Republicans are supporting Powell, saying he is doing a good job in the face of withering Trump criticism.
“I believe that under Chairman Powell, the Fed is generally on the right track,” said Rep. Jeb Hensarling (R-Tex.), chair of the House Financial Services Committee, which plays a critical oversight role for the Fed. “Chair Powell is the fourth Fed chair I’ve worked with. He’s probably been more forthcoming, more transparent and the most aggressive at making sure he has a healthy dialogue with key decision-makers on the Hill.”
Trump has upped his criticism in recent months as the Fed signaled it would continue its campaign of gradually increasing interest rates. The policy, long telegraphed, aims to avoid overheating in the economy, which can lead to a recession.
If Trump were able to successfully pressure the Fed into adjusting course, it could have sudden and unpredictable effects on the U.S. economy. Markets have long seen the independence of the central bank as a critical ingredient in stability, and Powell has vowed to uphold it.
Trump appointed Powell, a Republican with history of reaching across the aisle, last year, replacing President Barack Obama’s Fed chair, Janet L. Yellen. He was expected to continue Yellen’s course of gradual interest rate hikes, a long process of normalization since the Fed brought rates to zero in the 2008 financial crisis.
Powell’s first big challenge hasn’t been policy or a financial crisis but an unpredictable president.
Behind the scenes, Powell has been increasing transparency at the bank and forging deep alliances with Congress, moves that have helped keep a wide base of support for the Fed as Trump goes on the attack.
Powell’s outreach strategy began long before Trump started blasting him over the summer. A few days before he was sworn in as Fed chair in early February, Powell traveled to the GOP’s House Financial Services Committee retreat in Maryland. GOP lawmakers recall the meeting as engaging and candid about the economy and regulations.
Republicans say Powell’s predecessors, Yellen and Ben Bernanke, often gave long, professor-like answers to questions that left lawmakers unclear where top Fed officials stood. They prefer Powell’s “plain English” responses.
“I’m on my third Federal Reserve chair. Chairman Powell has been the most accessible, most open Federal Reserve chair that I have seen,” said Rep. Steve Stivers (R-Ohio), a member of the House Financial Services Committee.
Powell has continued to wear out the carpets on Capitol Hill, making 60 one-on-one visits and calls with lawmakers of both parties, according to his public calendars from February to August (the latest available). Some say Powell is the easiest Fed chair to deal with since Alan Greenspan, who was famed for his skill at navigating Washington’s political scene.
Many Republicans have bucked the president and voiced their support for Powell and the Fed’s current plan of gradually raising interest rates. Orrin G. Hatch, chair of the Senate Finance Committee, said Wednesday he thought Powell was doing a good job, adding that there are “pretty good people” at the Fed right now.
Even lawmakers close to Trump aren’t particularly bothered by Powell. “Obviously interest rates and [economic] growth have been heavily discussed but the chairman’s role in those discussions has been non existent,” said a member of the House Freedom Caucus, which is closely aligned with Trump on most issues, speaking on the condition of anonymity.
Still, Powell faces a tough balancing act in his outreach campaign.
“There’s such a thing as spilling your gut too frequently to the press and you end up confusing people,” former Fed chair Paul Volcker said. “I do think a little bit of mystery is entirely appropriate so long as you are telling the truth in the end.”
Trump told The Wall Street Journal on Tuesday that he “maybe” regrets appointing Powell, who was a compromise choice for the job, according to two people close to the process who were not authorized to speak publicly. Trump liked Yellen but felt he should have his own person in the job.
The shortlist of candidates was narrowed to Powell, a lawyer, and John Taylor, an economist beloved in traditional conservative circles.
As Trump called around to trusted friends to ask for their input, he kept saying, “I like low interest rates, don’t you?” and that he was afraid Taylor would raise them too fast, according to two people.
The scales tipped to Powell after Treasury Secretary Steven Mnuchin pushed hard for him, thinking he would be good for markets and regulatory reforms. Powell and Mnuchin meet frequently for breakfast and lunch, as their predecessors did, and the secretary has voiced his continued support for the Fed and its independence, as have other members of the administration.
Democrats, who have often spoken out against higher interest rates in the past, are also largely backing the Fed chair.
"I think Powell has put in a solid performance so far. He’s no drama,” said Sen. Mark R. Warner (D-Va.), a member of the Senate Banking Committee that oversees the Fed. “Trump is the king of debt. Of course he wants interest rates to remain low regardless of what it does to the economy.”
Powell has made it a point to speak without the usual economic jargon when he interacts with lawmakers and the public. He has tried to appear at events geared more toward a general audience, not the Wall Street crowd.
Starting in January, Powell plans to hold a news conference after all eight meetings of the Fed’s top policymakers. That’s a first in the Fed’s 104 year history.
“Jay Powell knew that whatever the Fed did, they would get criticism from the president. He was ready for it,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at Brookings. “He’ll stand up to this. He’d rather be known as a Fed chairman who did a good job."
Powell is also exploring whether to have an outside review of how the central bank operates, according to three people familiar with the situation who spoke on the condition of anonymity because they are not authorized to speak publicly.
This would not be a Government Accountability Office audit of the Fed, including monetary policy decisions, that Sen. Rand Paul (R-Ky.) and other Fed critics have long called for. The approach is more likely to be along the lines of what the Bank of England and Bank of Canada do by occasionally inviting outside experts to review their processes, but typically not their policy calls.
No decisions have been made, but Powell continues to look for ways to strengthen the bank and the public’s trust in it.
Trump’s main criticism is the Fed’s interest rate increases will slow economic growth and cause some people to lose their jobs. Powell argues the economy is strong and interest rates need to return to a more normal level — around 3 percent — that won’t cause the economy to overheat. The Fed last hiked interest rates in September to a range of 2 to 2.25 percent, which is still low by historical standards.
“We’re working hard to try to sustain the expansion and keep unemployment low and inflation right on target,” Powell said at his last public appearance Oct. 3. “There’s no reason to think this cycle can’t continue for some time, effectively indefinitely.”
For now, the economy is showing a lot of signs of strength and few in Congress see the Trump versus Powell standoff as a pressing issue. But that could change if the economy softens or if Powell doesn’t go as far as Republicans want on scaling back what they see as onerous regulations on banks.
Erica Werner contributed to this report.