Earlier this month, Sen. Catherine Cortez Masto (D-NV) questioned Federal Reserve Board Chairman Jerome Powell on agency independence and economic health during a Senate Banking Committee hearing.
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NewsTranscript
00:00of Nevada is recognized.
00:02Excuse me.
00:03Chairman Powell, thank you for joining us.
00:05And I always appreciate visiting with you
00:07in my office as well and your comments.
00:10Let me start by a comment you made in the opening.
00:13Over the past two years,
00:14you said the economy has made considerable progress toward the
00:17Federal Reserve's 2 percent inflation goal.
00:20Labor market conditions have cooled while remaining strong.
00:23Reflecting these developments, the risk to achieving our
00:26employment and inflation goals are coming into better balance.
00:30And what we know is that since Biden came into office,
00:32the United States has added over 15 million jobs.
00:35Under President Biden, we had 41 consecutive months
00:38of job growth.
00:39And you just said it again here today,
00:41that wages are up as well.
00:43Average U.S. wages and salaries grew by nearly, what,
00:4616,700 between January 2021 and April 2024.
00:53So would you agree with a statement
00:56by a ranking member earlier today
00:58that the U.S. has the greatest economy on the planet?
01:02I certainly would.
01:03Let me ask you this.
01:06Jumping around, and there's been talks today
01:08about the Fed's independence
01:10and how important the Fed's independence is.
01:13The Wall Street Journal recently reported former Trump
01:17administration officials drafted policy options
01:20to weaken the independence of the Federal Reserve
01:23if President Trump were to be elected in November.
01:26Allegedly, former administration officials discussed policy
01:29options to erode the Fed's independence to make it easier
01:35for a president to impact interest rate decisions
01:38or fire the Fed chair at will.
01:41Chairman Powell, how important is it
01:45that the Fed has independence to provide economic stability
01:49and anchor inflation expectations?
01:52So I think it's actually essential.
01:54It's literally essential.
01:55And the good news is I think that's pretty broadly understood
01:58and particularly on Capitol Hill on both sides of the aisle.
02:03I believe that people do understand that we need
02:06to do our work in a way that's outside the political process
02:10to the maximum extent possible.
02:11Of course, we need to be accountable
02:13and tremendously transparent.
02:14If you look at the box in the monetary policy report
02:17on central bank independence, it's really a box
02:19about transparency.
02:20That's the other side.
02:22So I think it's really important.
02:23I think it's an institutional arrangement
02:24that has served the public well.
02:26And I do believe that there's pretty wide support for it.
02:30And you just said it has been intentional
02:32and institutional arrangement over the years
02:34for this very reason, correct?
02:36Yes. This is a choice that we make.
02:37And I think it's countries around the world,
02:41advanced economies have all made this choice effectively.
02:43And the results are clear
02:45that you now have independent central banks
02:47and you have better anchored inflation expectations
02:50and you have better performance on inflation
02:52and better performance in the economy generally,
02:55which isn't to say there won't be shocks and crises
02:57and that kind of thing.
02:58And then let me touch on a subject that one
03:01of my colleagues just talked about because I was going
03:03to ask about this, which is our immigration.
03:06In Nevada, immigrants are extremely important
03:09for our economy.
03:11They're essential workers, doctors,
03:12nurses and teachers in my community.
03:15Can you, without getting into other ancillary issues
03:21that don't impact what you do, can you talk about
03:25and elaborate on how immigration affects the employment rate
03:29and why you look at it and for what reason you look
03:32at the immigration issue?
03:34So we, again, we don't, as you, just to make the point
03:37that you made, we don't take a position, we don't comment
03:40on immigration policy.
03:42We have no responsibility for it.
03:44It's not our job.
03:45But, so we just look at the numbers and we sort of try
03:49to assess the economic consequences of immigration.
03:52And over the last two years, we, two years ago,
03:55we had an economy where we really had a labor shortage.
03:59And what's happened is we've had a wave of immigration.
04:02And those, many of those people have gone to work and gone
04:06to work legally through the asylum process.
04:11Not all of them.
04:12There's also a group that is not,
04:13that has not been legally processed.
04:15But many of this latest group have been, have sought asylum
04:19and then gotten, gone through the process
04:21of getting a work permit.
04:22So what that means is that employers wanted workers
04:26and there's, there are now, there were more job openings
04:30than there were people actively seeking work or working.
04:33And so now you have a new supply of workers
04:36and they've filled those jobs.
04:37So we have a bigger economy.
04:39But it's not a tighter economy
04:40because labor supply has increased the economic capacity.
04:44That's just the arithmetic.
04:45That's not saying it's a good thing or a bad thing.
04:48There are other policy choices that could be made
04:50and they're not for us to make.
04:51When you say greater, greater economy.
04:53A larger economy.
04:54In other words, it has improved the growth of our economy.
04:57The economy grew 3 point something percent,
05:003.4 percent I believe last year.
05:02And some part of that was that,
05:04as Congressional Budget Office analysis showed,
05:08and to many's surprise,
05:10there had been a really significant uncounted group
05:13of workers coming into the country who had gone to work.
05:17And that's part of the story of how the economy managed to grow
05:21that much while inflation was coming down pretty sharply.
05:24Inflation came down two full percentage points during 2023
05:28while the economy was growing at 3.4 percent.
05:30So, and while these people were coming in.
05:33So that is part of the explanation for why we had
05:36such an interesting and pretty good year in 2023.