The US Federal Reserve is already looking very different under Jerome Powell than it did under Janet Yellen

Federal Reserve chair Jerome Powell. (Photo by Alex Wong/Getty Images)
  • New Federal Reserve Chair Jerome Powell vowed continuity with his precedessor, Janet Yellen, but struck a much different tone in testimony.
  • Yellen appeared sceptical of the likely benefits from tax cuts while Powell, who was appointed by President Donald Trump, was confident it will boost growth.
  • Powell avoided even indirect answers to questions on social issues like race, gender, inequality and immigration, which Yellen was often happy to explore.

Chalk it up to the basic differences in outlook between a labour economist and a business executive.

The Federal Reserve’s new chair, Jerome Powell, struck a very different tone from his predecessor during his first congressional testimony since taking over for Janet Yellen at the start of this month – despite the reassurances of policy continuity that often accompany a high-profile change of guard.

Not only did Powell appear much more confident about the likely benefits of recently-enacted tax cuts, he was also much more reluctant to answer questions about key social issues like inequality, race and immigration.

Powell spooked financial markets a bit with some of the surprising optimism he showed about the economic effects of the tax cuts – an opinion that belied other attempts not to comment on fiscal policy matters.

“My personal outlook for the economy has strengthened since December,” he said, citing the tax cuts, which he said could bolster economic growth for as many as two years.

Not my job

Asked multiple times about the persistence of elevated rates of black unemployment compared to that of whites, Powell said there was little the Fed could do beyond pursuing its mandate, neglecting to mention a large division of Fed community development experts directly dedicated to exploring and researching issues like poverty and race.

“What we can do on that front sir is we can take seriously our obligation to maintain maximum employment,” he said.

Yellen was a champion of community development at the Fed. And while, like her predecessors, Yellen was often forced to duck politicians’ questions that sought to seek her direct endorsement for specific policies, she would at least address the issues at hand in a big picture way.

She decried the increase in income inequality and warned against measures aimed at reducing immigration, all with a basis in sound economic research.

Powell took a very different approach, saying repeatedly: “That’s for Congress to work out.”

Democrat Keith Ellison asked specifically and repeatedly about the economic effects of removing a large segment of workers from the population. Powell demurred: “We of course don’t do immigration policy at the Fed.”

To which Ellison replied: “I’m not asking you about immigration policy, I’m asking about economic impact.”

The congressman kept at it but the most Powell would concede is that the size of the workforce could affect the economy’s growth potential and should be considered in the debate.

In short – there’s a new sheriff in town, and Powell seems a lot less willing to address the country’s underlying social problems than his predecessor.

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