Federal Reserve Chairman Jerome H. Powell, in a private discussion with Sen. Tim Scott last week, said he had not spoken to President Trump about interest rates and would remain independent from political interference, the Republican senator said.
Powell’s comments came after weeks of intensifying public pressure from President Trump, who has repeatedly said he would like Powell and the Fed to keep interest rates low to spur economic growth.
Past presidents from both parties have sought to insulate the central bank from political pressure, worried it could taint the Fed’s decision-making and erode its credibility with the public.
“I asked him specifically about the independence of the Fed, and he reinforced the fact that their goal is to [address] unemployment, our economy, and that is their only objective,” Scott (R-S.C.) said in an interview.
Powell also told Scott, according to the lawmaker, “that the president has not weighed in with him at all on interest rates whatsoever, or on any role the Fed has.”
The central bank has raised interest rates twice during Powell’s tenure, and is it expected to raise rates twice more this year, including when it next meets, in September.
Interest rates have been historically low for the past decade as part of the central bank’s effort to help the economy recover from the Great Recession, and the increases are an effort to return to normal levels and ward off inflation.
Scott’s account is significant because Powell is under increasing White House pressure to back down from his goal to slowly raise interest rates.
Powell told NPR last month: “We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns. We do our work in a strictly nonpolitical way, based on detailed analysis, which we put on the record transparently.”
Sen. Bob Corker (R-Tenn.) said he also met with Powell last week. Corker — like Scott a member of the Senate Banking Committee — would not divulge details of their private conversation but said he frequently brings up issues related to preserving the independence of the Fed when he meets with people like Powell.
The White House, going back to the Clinton administration, has largely avoided commenting on the Fed and interest-rate policy, in an effort to insulate the central bank from political interference and pressure. Trump has abandoned that tradition this year, though his advisers have said the president is simply stating his opinion.
Trump nominated Powell and was told by key advisers that Powell would not move aggressively to raise interest rates.
The benchmark U.S. interest rate, which plays a large role in setting borrowing costs for mortgages, credit cards, small businesses and auto loans, has roughly tripled since Trump was sworn into office last year. The Fed has indicated it expects to raise interest rates two more times this year.
These increases, Trump has told advisers, could harm economic growth, making it more expensive for companies and homeowners to borrow money. Trump has repeatedly made his displeasure with the Fed and Powell known.
“I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said in an interview with Reuters. He urged the Fed to avoid doing anything that could slow economic growth.
Corker said comments such as these could be damaging, as it could make the Fed appear to be a political symbol for the public and lead people to see the central bank’s decisions with a political taint whenever it acts.
“I think the Fed understands what its role is, and its role is to be an independent body. And to the extent it becomes politicized, like unfortunately so many other things around here have over the last year and a half, that would be a very negative place for our country to go,” Corker said. “So I would hope the president would refrain from making comments like that.”
Corker said, based on his discussions with Powell last week, “I’m certain they’re going to continue to be independent and do whatever they feel is appropriate.”
Sen. Richard C. Shelby (R-Ala.), another member of the Banking Committee and its former chairman, said presidents often find themselves at “loggerheads with the Fed because they think that the Fed raising the cost of money, interest rates, will choke off the economy.”
“Well, the Fed was set up to be independent from politics as much as you can be in Washington, from the whims of the moment, whether it’s the president or whether it’s the Congress,” Shelby said. “You know, a lot of people beat up on the Fed. I probably have at times myself. But I think you have to respect the independence of the Fed.”
Other members of the committee appeared to brush off Trump’s recent comments.
“Presidents have always made comments on how they think economic policy should be made, and I’ve not heard any effort by the president to try to interfere,” said Senate Banking Committee Chairman Mike Crapo (R-Idaho). “The Federal Reserve is an independent board of governors, and they will be independent.”