SAN FRANCISCO/WASHINGTON (Reuters) - Federal Reserve Chairman Jerome Powell came to Capitol Hill on Wednesday with two goals: cementing the case for an interest rate cut at the end of this month, and bolstering his own congressional wall of protection against a president who has made a daily habit of Fed bashing unseen since the 1970s.
Well before the end of the first of his two days of testimony before Congress, Powell had accomplished both.
Powell’s pledge to “act as appropriate” to lengthen the already record-long U.S. economic expansion fuelled financial market bets for a rate cut of at least a quarter of a percentage point when the Fed meets at the end of this month.
But running through more than three hours of testimony before a U.S. House of Representatives panel was a second, equally important, thread: a clear play to congressional opinion that any rate cut would be driven not by President Donald Trump’s call for one, but by the economy.
It began with Powell telling lawmakers he was accountable “to you and the public,” not the political interests of the president who appointed him as chief of the U.S. central bank.
Trump has repeatedly expressed his unhappiness with Powell’s failure to cut rates, and has said he has the power to fire the Fed chair. Lawmakers on both sides of the aisle on Wednesday made their views clear: They are siding with Powell.
“I urge Chairman Powell and other Federal Reserve Board governors not to submit to the high-pressure tactics of this president who continues to continues to push reckless and harmful economic and social policies,” Representative Maxine Waters, the Democratic chair of the House Financial Services Committee, told Powell. She asked Powell what he would do if Trump asked him to resign.
“Of course I would not do that,” Powell said, and repeated that he fully intends to serve his four-year term as Fed chair, which expires in February 2022. His term as a member of the Fed’s Board of Governors will expire in January 2028.
The Federal Reserve Act says a U.S. president can remove a Fed chair only “for cause,” and any move to oust Powell would likely touch off a legal fight.
Patrick McHenry, the Financial Services panel’s top Republican member and a supporter of Trump’s economic policies, was one of several lawmakers who gave Powell credit for what McHenry called his “proactive communications” with members of Congress. McHenry provided his own opening for Powell to push back against Trump’s criticism.
Does public criticism enhance or impede the Fed’s independence, McHenry asked Powell.
“Neither,” Powell responded, adding that emotion also plays no role in Fed decisions. “We will always focus on doing the job you have assigned us.”
Republican Senator Patrick Toomey, a member of the Senate banking panel that will hear from Powell on Thursday, was even more pointed. Removing Powell from his post, he told Bloomberg TV, would be a “very bad idea.”
The congressional support, expressed in the face of a president who has urged the Fed to slash rates and accused Powell of undermining the U.S. economy, does not come out of the blue. Powell has made outreach to Congress a signature part of his job.
As of May, the latest month for which the Fed chairman’s public calendars are available, Powell had conducted more than 150 meetings or phone calls with lawmakers since becoming the Fed chair in February 2018.
In all, he has spent time with at least 48 of the Senate’s current 100 members, including all of the Senate Banking Committee Republicans and nine of the 12 Senate Banking Democrats who will question him on Thursday.
He has also met with or had phone calls with 45 current members of the House of Representatives, including 17 current members of the House Financial Services Committee.
All told, over a 16-month period Powell has spent less than two hours in person and on the phone with the president. But he has put in about 72 hours of face- and phone-time with at least 100 different lawmakers, a Reuters review of Powell’s calendar shows. That includes 45 hours with Republicans and 27 hours with Democrats.
The public calendars of Powell’s predecessor, Janet Yellen, reflect meetings with just 70 different lawmakers over the course of her four-year tenure.
One Republican on the House Financial Services Committee, Andy Barr, registered his support of Trump’s fault-finding with Fed policy, saying that wherever criticism comes from, such feedback is a “necessary and constructive part of oversight (that) in no way compromises Fed independence.”
St. Louis Fed President James Bullard echoed that view at a separate event later on Wednesday. Lawmakers regularly “say what they want to say,” Bullard said. “Why not the president?
Powell pushed back mildly. “You have oversight over us,” he told Barr. “In our system of government, it’s Congress,” not any other part of government, that oversees the central bank.
In the end, Wednesday’s back-and-forth with Congress shows Powell’s outreach to Congress is paying dividends.
“Stay strong and courageous,” urged Representative David Scott, a Democrat from Georgia. “Have no fear: The president can’t fire you, and we in Congress, both Democrats and Republicans, got your back.”
(GRAPHIC: Powell's outreach to lawmakers - tmsnrt.rs/2JAUmkH)
Reporting by Ann Saphir; Editing by Chizu Nomiyama and Leslie Adler