This summer, President Donald Trump twice overstepped traditional norms by criticizing the Federal Reserve for raising interest rates. That drew disapproval from observers who worried that the White House would erode the central bank’s independence. But Federal Reserve Chair Jerome Powell remains stoic about the controversy—and a little bit wry.
“My focus is on controlling the controllable,” he said Wednesday at The Atlantic Festival in Washington, drawing knowing laughter from the crowd. “We control what we do at the Fed.”
Of course, trying to keep a steady hand on the economy is perhaps even more complicated than trying to keep Trump on course—and has similarly high stakes. The good news for Powell, whom Trump appointed in 2017, is that the economy is chugging along nicely, with the unemployment rate at its lowest in decades, growth strong, and inflation steady. The question is whether that can last, with some economists wondering whether a new recession is overdue. Powell’s interviewer, Judy Woodruff, posed just that question to him, asking whether the rosy current moment can last indefinitely.
“Indefinitely is a long time,” Powell said. “Not every business cycle is going to last forever, but no reason to believe this cycle can’t go on for quite some time, effectively indefinitely.”
Still, there are concerns about the economic situation as it is, and there are those who say that the Fed isn’t responding enough. The most glaring weakness is that wages are growing slowly, even as other indicators are up more. Powell didn’t have any easy answers as to why that is.
“It’s a bit of a mystery why they’re not bidding up this scarce commodity of labor more,” he said. “We have seen a gradual increase. My own expectation would be that we would see more of that.”
It’s possible, Powell said, that workers simply don’t have the same bargaining power to demand higher pay that they used to, a factor of both globalization and mechanization of jobs. He said he’s also concerned that if the U.S. workforce doesn’t continue to be better educated, especially in relation to the rest of the world, the nation won’t be able to take advantage of technological advances.
There are also interest-rate concerns. Fiscal hawks worry that perpetually low interest rates will leave the Fed with few options to stimulate growth should a recession occur. (Lower interest rates make it cheaper to borrow, which helps spur action.) But Trump is not alone in his opposition to raising rates; some progressive economic observers agree.
Powell said he sees the rates as a balance between the Fed trying to avoid suffocating growth and to maintain its tools for future use. He said he thinks the Fed is striking that balance now, and the positive indicators in the economy suggest it’s working. But that doesn’t mean he feels totally safe about the economy.
“Nobody wants a central banker who sleeps well,” Powell said. “What good is that?”