What Powell said to the Senate about interest rates, tariffs and debanking

Jerome Powell:
it’s not the Fed’s job to make or comment on tariff policy.

Simone Del Rosario:

Federal Reserve Chair Jerome Powell reminded Senate Banking Committee members of this fact a number of times during his semiannual Congressional testimony.

But as the arbiter of price stability, it’s natural to question the Fed on tariffs, which many economists warn could be inflationary.

Jerome Powell:

just generally, when somebody’s got to pay the tariff, be them. It can be the exporter, it can be the importer, it can be a middle man, and somebody does.

it’s going to be easy to identify with accuracy exactly where costs do fall, but I think it’d be hard to guarantee any particular outcome.

I think the standard case for for free trade and all that logically still makes sense, it didn’t work that well when we have one very large country that doesn’t really play by the rules.

that’s for elected people and and it’s not for us to comment ours. Ours is to try to react to it in a thoughtful, sensible way and make monetary policy so that we can achieve our mandate.

Simone Del Rosario:

The Federal Reserve’s dual mandate is to maintain maximum employment while keeping inflation near 2%. The Fed sets interest rates to meet this goal, which affects how expensive it is to borrow money.

Jerome Powell:

The So overall, the economy is is strong, growing two and a half percent last year. The labor market is is also very solid. Unemployment at 4% of quite a low level. Inflation last year was 2.6% for the year. So we’re in a pretty good place with this economy, we want to make more progress on inflation, and we think our policy rate is in a good place, and we’re not. We don’t see any reason to be in a hurry to reduce it further

Simone Del Rosario:

Powell’s position on interest rates is in direct conflict with a recent declaration from President Donald Trump.

Donald Trump:

“I’ll demand that interest rates drop immediately. And likewise, they should be dropping all over the world.”

Simone Del Rosario:

Lower interest rates could spur more spending, which could be inflationary, though not always.

The Fed chair did find some common ground with Trump, who took issue with banking practices last month.

Donald Trump:

“I hope you start opening your bank to conservatives because many conservatives complain that the banks are not allowing them to do business within the bank, and that included a place called Bank of America.

I hope you’re going to open your banks to conservatives because what you’re doing is wrong.”

Simone Del Rosario:

While Trump’s focus is on conservatives, concerns about debanking have reached across party lines. The president has an ally in Sen. Elizabeth Warren, who chastised the practice last week.

Jerome Powell:

We hear a lot of people talking about that, and you know, it’s time to take a fresh look. I think we don’t intentionally do these things, but sometimes regulation leads things to happen, and we need to be, we need to be working on that.

Simone Del Rosario:

But Warren and Trump still diverge on the role of the Consumer Financial Protection Bureau, which Warren says tackles debanking. Over the weekend, acting director Russell Vought told employees to stop all work.

Warren was instrumental in the creation of the bureau, which is directly funded by the Federal Reserve.

Elizabeth Warren:if the CFPB is not there examining these giant banks to make sure they are following the laws on not cheating consumers. Who is doing that job?
Jerome Powell: I can say no other federal regulator,
Elizabeth Warren: no one.

Mike Rounds: The suggestion that the ranking member has made here is that the big banks can now scam individuals. Right now, any change in the laws regarding how they’re supposed to be treating the individual consumers out there, or anything along that line?
Jerome Powell: Law changes? No, I’m not aware of any changes,
Mike Rounds: any rules that they would have to follow. Not that I’m aware of. Are they still audited, and do they still have the regulators in watching all of their businesses, just as they did before? Well, they’d have all the regulators except for the CFPB

Simone Del Rosario:

It wasn’t all tough questions for Powell. In fact, one was a bit of a softball, if you will.

John Kennedy: the fact is, knock on wood, we have experienced a soft landing, haven’t we?
Jerome Powell: : Not for me to say, really, I let others
John Kennedy: Have we experienced a hard landing.
Jerome Powell: No.
John Kennedy: Are we in a recession.
Jerome Powell: No, we’re not.
John Kennedy: I call that a soft landing

Simone Del Rosario:

While inflation is still hotter than the Fed would like to see, Republican Sen. John Kennedy said Fed officials “deserve credit” for bringing it down from 9% without triggering a recession.