Powell Seeks to Support Economy, Defend Fed Independence -- Update

By Kate Davidson Features Dow Jones Newswires

Federal Reserve governor Jerome Powell would strive to support the economy's progress toward full recovery and defend the central bank's independence if confirmed as its next leader, he will tell a Senate panel Tuesday when it considers his nomination.

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In prepared testimony released by the Fed on Monday, Mr. Powell said Fed officials continue to expect interest rates to rise "somewhat further" and the size of the central bank's balance sheet to shrink gradually.

As the next Fed chairman, Mr. Powell said he would "do everything in my power" to achieve the Fed's dual goals of maximum employment and price stability, "while preserving the Federal Reserve's independent and nonpartisan status that is so vital to their pursuit."

"I am committed to making decisions objectively and based on the best available evidence," he will tell the Senate Banking Committee on Tuesday. "In doing so, I would be guided solely by our mandate from the Congress and the long-run interests of the American public."

Mr. Powell also said the Fed must be prepared to respond "decisively and with appropriate force" if faced with new threats to economic and financial stability, and therefore must retain its flexibility to adjust its policies.

Republicans on Capitol Hill have pursued legislation in recent years to limit the Fed's discretion in setting policy and enhance congressional oversight of the central bank, in part by requiring audits of its monetary policy decisions and the use of mathematical formulas to guide policy-making. Mr. Powell didn't mention those efforts explicitly, but he has opposed them in the past, along with other Fed officials.

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Mr. Powell also said the Fed would continue to consider appropriate ways to ease regulatory burdens on financial firms while preserving core regulatory changes implemented in the wake of the financial crisis, including requiring banks to maintain higher capital and liquidity levels, undergo annual stress tests and submit "living will" plans explaining how they would fail without needing taxpayer assistance.

"In doing so, we must be clear and transparent about the principles that are driving our decisions and about the expectations we have for the institutions we regulate," he added.

President Donald Trump said Mr. Powell had the "wisdom and leadership" to guide the economy through any potential turbulence when he said the Fed governor was his choice to succeed current Fed Chairwoman Janet Yellen. Mr. Trump's decision marked the first time in decades that a first-term president hasn't offered a second term to the incumbent Fed leader.

Mr. Powell, who has served on the Fed board since 2012, is expected to see a relatively smooth path to confirmation. The Senate approved his nomination to the Fed board in 2012 and 2014 with broad bipartisan support, and no senator has signaled plans to vote against him for chairman.

If confirmed, Mr. Powell would take the helm of the central bank when Ms. Yellen's term as chairwoman ends Feb. 3. Ms. Yellen said last week she intends to resign from the Fed board -- she also is serving a term as governor that expires in 2024 -- once a new Fed leader is sworn in.

Write to Kate Davidson at kate.davidson@wsj.com

(END) Dow Jones Newswires

November 27, 2017 18:20 ET (23:20 GMT)