The Fed will not become a “climate policy maker,” Jay Powell said, launching a vehement defense of the US central bank’s independence from political influence.

In a speech on Tuesday, the Fed chairman said the central bank should steer clear of issues outside its congressional mandate and instead maintain a narrow focus on maintaining stable consumer prices, promoting a healthy job market, and ensuring safety. banking system in the country. .

“It is imperative that we stick to our legal goals and powers, and resist the temptation to broaden our reach to address other important social issues of the day,” he said at a conference hosted by the Swedish central bank.

“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.”

“We are not and will not be a climate policy maker,” he added.

Republican lawmakers have charged feed it He went beyond his mandate to undertake to consider climate-related financial risks, an area Powell said on Tuesday that the central bank has “narrow but important responsibilities” associated with banking supervision.

He added, “The public would reasonably expect supervisors to require banks to understand and appropriately manage their material risks, including financial risks from climate change.”

In a panel that followed the remarks, Mervyn King, former governor of the Bank of England, said the central bank’s independence was “a huge responsibility and one that could not be abused by trying to infiltrate areas not expressly authorized by the relevant political process”.

On climate-related issues, he said, “I am concerned that people, in their great zeal to do good, are actually endangering the independence of the central bank.”

Republican senators last year blocked the appointment of Sarah Bloom Raskin, chosen by Joe Biden to lead banking oversight at the Federal Reserve, after he fell out with her calls for regulators to preemptively address financial risks related to climate change.

Many other major central banks have advocated expand their competence To include climate risk monitoring. Mark Carney, another former Governor of the Bank of England, was the main supporter of such a shift.

Powell said on Tuesday that central bank independence is especially important if the Fed is to succeed in its battle to tame inflation, which is still rising to multi-decade highs.

“Restoring price stability when inflation is high could require unpopular measures in the short term because we raise interest rates to slow the economy,” he said. “The absence of direct political control over our decisions allows us to take these necessary actions without considering short-term political factors.”

Since March, the Fed has raised its benchmark interest rate from near zero to just under 4.5 percent and plans to further squeeze the economy this year. In separate remarks on Tuesday, Fed Governor Michelle Bowman said the central bank still has “a lot of work to do” in terms of tightening. She added that the size of the next rate will increase and the final stopping point will depend on the data.

“I will be looking for convincing signs that inflation has peaked and for more consistent indications that inflation is on a downward trajectory,” she said at the event hosted by the Florida Association of Bankers.

Democratic lawmakers have already called on the central bank to roll back its tightening plans, warning of unnecessary economic suffering and excessive job losses.

“The tools we have are working and I think there is nothing wrong with our mandates,” Powell told the committee.

Speaking at the same event in Stockholm, European Central Bank executive board member Isabel Schnabel said monetary policymakers should press ahead with raising interest rates to fight inflation despite the risk that higher borrowing costs could derail global environmental efforts.

The green transition will not thrive in a hyperinflationary environment. “Price stability is a precondition for the sustainable transformation of our economy,” Schnabel said at the event in Stockholm on Tuesday.

Schnabel’s view is in line with the consensus among central bankers that it is up to governments to drive the transition to cleaner energy, while monetary policymakers should focus on their primary task of fighting inflation. She noted the “continued buildup of underlying price pressures” though An unexpectedly sharp drop in headline inflation in the eurozone With lower energy prices.

But Schnabel said the ECB needed to act faster to bring its investment and lending operations in line with the goals of the Paris Agreement and achieve carbon neutrality by 2050.

The ECB has been aiming to make its holdings of corporate bonds more climate-friendly by weighing climate-related criteria when it makes new purchases. Schnabel added, however, that because it stopped increasing its net bond holdings, it “lost a lot of its weight.”