Powell says Fed will resist pressure to pursue climate goals
Fed Chairman Jerome Powell on Wednesday emphasized that the Federal Reserve is not a climate regulator and will resist any political pressure to pursue green goals.
Powell, speaking at Stanford University, said that it is crucial to avoid “mission creep” in order to maintain the public’s trust. He said the central bank needs to focus solely on its dual mandate of price stability and maximum employment.
“Policies to address climate change are the business of elected officials and those agencies that they have charged with this responsibility,” Powell said. “The Fed has received no such charge. We do, however, have a narrow role that relates to our responsibilities as a bank supervisor.”
While he has stated similar views in the past, the emphasis on the Fed remaining independent comes as some climate activists want the central bank to take a more hands-on role in curbing climate change.
Powell said that the public expects that the institutions, like banks, that the Fed regulates and supervises will comprehend and be able to manage “the material risks that they face, which, over time, are likely to include climate-related financial risks.”
“We will remain alert to the risk that there will be pressure to expand that role over time. We are not, nor do we seek to be, climate policymakers,” he emphasized.
Powell said later during a question-and-answer period that it is important that he and other Fed officials don’t get dragged into “partisan political fights.”
“When I testify, people are always trying to get me and my colleagues to support their perspective on, you know, fiscal issues or immigration issues and they think of an economic hook,” Powell said, pantomiming someone pulling a rope in. “But we just don’t do that.”
Given the prominence of the Fed and its supervision over major banks, climate activists and some Democrats have been pushing the central bank to expand its remit and do more to push firms to combat climate change.
In a very dramatic display of that activist pressure, in October a group of climate protesters stormed the stage at a much-anticipated speech by Powell, causing the event — which was being livestreamed — to be paused until the protesters were removed.
“Off fossil finance, Jay, off fossil finance,” the protesters chanted as they made their way to the dais at the front of the room.
Still, the Fed has faced some criticism from Republicans for wading too far into the climate debate.
Last year a group of Republicans sent a letter to Powell expressing frustration with the Fed’s engagement in environmental and climate research, which they argued is “far outside” the central bank’s statutory mandate.
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At the time, the lawmakers noted that the Fed recently announced a pilot climate risk analysis exercise that uses scenario analysis to examine the resiliency of financial institutions under different hypothetical climate scenarios.
In the letter, the senators contend that despite “clever pilot program marketing,” the initiative amounts to a “climate stress test.” The Fed itself has said that its climate scenario analysis is distinctly separate from bank stress tests.
