Powell assails gold standard supported by Trump Fed nominee
Federal Reserve Chairman Jerome Powell on Wednesday rejected the idea of returning the United States to the gold standard even as he asserted that his remarks should not be seen as criticism of a proposed presidential nominee to the Fed Board.
“I want to make sure this isn’t interpreted” as criticism of Judy Shelton, Powell prefaced his response to a question about whether the U.S. should return to the gold standard from Jennifer Wexton, a Democrat. Then, he continued. “I don’t think that would be a good idea.”
Shelton, the U.S. director of the European Bank for Reconstruction and Development, is President Donald Trump’s pick for one of two open seats on the Fed Board. She has advocated a return to the gold standard.
Powell, who would work with Shelton to set monetary policy if Trump follows through with his nomination and the Senate confirms the decision, said it would be a bad idea because it would mean the Fed would no longer be able to look after full employment and stable prices.
“There have been plenty of times in the fairly recent history where the price of gold has sent signals that would have been quite negative for either of those goals,” Powell said. “And I don’t think that’s something that would be attractive; no other country uses it.”
The U.S. abandoned the gold standard for good in 1971. If Congress rewrote the laws to force the Fed to operate monetary policy so as to stabilize gold’s value in dollar terms, Powell said, unemployment could rise or inflation could swing wildly and it would no longer be the Fed’s job to do anything in response.
Wexton tried to draw Powell out on Shelton, saying that his views suggest he doesn’t agree with her. But Powell, who has been on the receiving end of repeated criticism from Trump over interest-rate policy and what the president says is the Fed’s undercutting of the U.S. economy, insisted he was not inserting himself into the process of picking a nominee.
“It is totally up to the president, we are totally on the sidelines,” Powell said, walking what has become a familiar political tightrope.
Reminded by another member of Congress of Trump’s charge that the Fed doesn’t know what it’s doing, however, Powell did not hesitate to demur.
“I would say let’s take a look at the economy and let that be our report card,” he said, pointing to 50-year-low unemployment and below-2% inflation despite headwinds from abroad. “Overall I’d say that our economy is on a solid footing.”
(By Ann Saphir; Editing by Chizu Nomiyama)