Powell “Fiscal policy, Inflation Stimulus Factor…Federal Debt Is Not Considered In Monetary Policy”

Chairman Powell Of The Fed, Caught Between Independence And Political Considerations (Source: WSJ)

Jerome Powell, Chairman Of The United States Federal Reserve (Fed), Pointed Out That Fiscal Policy Could Fuel Inflation. On The 24th (Local Time), Chairman Powell Appeared Before A Senate Banking Committee Hearing And Stated, “Government Fiscal Spending Could Stimulate Price Increases,” Which Is One Of The Variables To Pay Attention To When Deciding Monetary Policy.

However, He Drew A Line By Saying, “When Deciding Monetary Policy, We Do Not Consider The Level Of Federal Debt Itself.” This Statement Emphasized The Independence Of Monetary Policy, Which Is Interpreted As A Reaffirmation Of The Fed's Existing Position To Focus On Real Economic Indicators Such As Prices And Employment Rather Than Fiscal Soundness.

Chairman Powell's Latest Remarks Seem To Reflect Caution About The Impact Of The U.S. Government's Expansionary Fiscal Stance On Prices, Yet The Fed Still Shows Its Will To Set The Direction Of The Benchmark Interest Rate Based On Independent Judgment.