Fed Hike Aftermath Series: Next Fed Chair Powell pledges continuity and stability in hearing testimony

In an opening statement to the Senate Banking Committee released on Monday evening, Mr. Jerome Powell, whom President Donald Trump nominated to replace incumbent Fed Chair Janet Yellen vowed to continue supporting the economy with an aim towards full recovery, while pledging to defend the autonomy of central bankers.  While he voiced his support for further interest rate increases and gradual reduction in the balance sheet, like Chair Yellen he added that such moves would be dependent on future conditions. He said, “If confirmed, I would strive, along with my colleagues, to support the economy's continued progress toward full recovery. Our aim is to sustain a strong jobs market with inflation moving gradually up toward our target. We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink. However, while we endeavor to make the path of policy as predictable as possible, the future cannot be known with certainty. So we must retain the flexibility to adjust our policies in response to economic developments. Above all, even as we draw on the lessons of the past, we must be prepared to respond decisively and with appropriate force to new and unexpected threats to our nation's financial stability and economic prosperity--the original motivation for the Federal Reserve's founding.”

In his testimony, he praised the current financial stability, praised risk levels at the banks and promised to tailor regulations, “As a regulator and supervisor of banking institutions, in collaboration with other federal and state agencies, we must help ensure that our financial system remains both stable and efficient. Our financial system is without doubt far stronger and more resilient than it was a decade ago. Our banks have much higher levels of capital and liquid assets, are more aware of the risks they run, and are better able to manage those risks. Even as we have worked to implement improvements, we also have sought to tailor regulation and supervision to the size and risk profile of banks, particularly community institutions. We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms--strong levels of capital and liquidity, stress testing, and resolution planning--so that banks can provide the credit to families and businesses necessary to sustain a prosperous economy.”