Fed Chair Powell defends rate hike campaign, argues for central bank independence

Yahoo Finance’s Jennifer Schonberger joins the Live show to discuss Fed Chair Jerome Powell’s comments on central bank independence and rate hikes in a new speech in Stockholm.

Video Transcript

JULIE HYMAN: And here's what you need to know as the clock hits 9:00 AM. Futures are in the red this morning, with all eyes on Fed Chair Jerome Powell. He's speaking, while concerns over higher interest rates linger for investors. We'll bring you the details on his comments.

BRIAN SOZZI: Plus another brutal quarter for Bed Bath Beyond, just days after the company warned of potential bankruptcy. I've got seven shocking stats you need to know from that really bad earnings report.

BRAD SMITH: And Coinbase cutting about a fifth of its workforce, as it looks to navigate the crypto downturn. We'll talk to one analyst on what could come next for the company later on in the show. But we begin today with our top story.

BRIAN SOZZI: Investors are closely watching an overseas speech from Fed Chair Jerome Powell this morning, as he addresses central bank independence. Yahoo Finance correspondent Jen Schonberger is all over this one. Jen.

JENNIFER SCHONBERGER: Hey there. Good morning, Brian. That's right, Fed Chair Powell making the case for the Federal Reserve's independence in a speech in Stockholm, Sweden. Though the speech not mentioning monetary policy, the Fed Chair appears to defend the Fed's aggressive rate hike campaign, framing the Fed's independence as necessary, as stable inflation is the foundation of a healthy economy. And that could require taking actions that perhaps not popular but necessary.

The Fed Chair saying, quote, "The case for monetary policy independence lies in the benefits of insulating monetary policy decisions from short-term political considerations. Price stability is the bedrock of a healthy economy and provides the public with immeasurable benefits over time. But restoring price stability when inflation is high can require measures that are not popular in the short term, as we raise interest rates to slow the economy." Of course, Powell's comments coming as the Fed has raised rates by 5.25% points over the past year in the most aggressive manner since the 1980's. The Fed Chair has repeatedly warned that bringing down inflation would be painful, arguing that the central bank is going to remain steadfast in raising rates and holding them at elevated levels to combat inflation, even as markets pricing in rate cuts later this year.

Now, Powell said the Fed should resist the temptation to broaden the central bank's scope to include social issues. He underscored that the central bank should, quote, "stick to our knitting and not wander off to pursue perceived social benefits that are not tightly linked to our statutory goals and authorities." Though when it comes to climate change, Powell noted that, in his view, the Fed does not-- does have, rather, narrow responsibilities to supervise climate related financial risks for banks. He said, quote, "Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy. We are not and will not be a climate policymaker."

Now, Powell is expected to answer some questions after making this speech, where we will closely monitor whether he will make any mention of monetary policy or his outlook for inflation ahead of the Fed's next policy meeting on February 1st. I will be monitoring that and we'll bring you those headlines as needed. Back to you.

BRAD SMITH: All right. Yahoo Finance's own Jen Schonberger. Jen, thanks so much for teeing up the discussion here. Just as we continue to evaluate where the equities markets are going to continue to move, at least here in the pre-market, on any of the commentary that continues to come out of Fed Chair Jerome Powell, even though the speech itself is already out there and available and people are listening as well. I think, at the end of the day, it's the FOMC that has continued to be kind of this-- the cold water crew on the equity markets, unfortunately, while they're trying to get to that dual mandate. And nobody envies that job, but at the same time, the restoration of price stability and really dampening inflation that has run rampant to this point that continues to impact household spending propensity, even all the way to businesses and how they're having to restructure some of their costs as well, it continues to be felt across the market. And it's just a question, over the course of this year, as they begin to either pause or signal some type of pivot in tone that we could see some type of reprieve in the equity markets as well.

JULIE HYMAN: Yeah. Bottom line, there doesn't seem to be anything market moving in this particular speech. From a policy perspective and more of a big picture perspective, it is interesting that Powell is saying, we won't be a climate policymaker. Some of the critics of the bank had sort of leveled that charge that the Fed was, in some of its commentary, either by Powell or other members, sort of strayed into wanting to affect policy when it comes to ESG or green banking, what have you. So it's interesting that he's making those comments, but again, not market moving.

BRIAN SOZZI: Yeah, might be a little bit more here than I initially thought. I didn't see much in here. But I will say this. Now we had Raphael Bostic yesterday out here came out yesterday, and Mary Daley, of course, members of the Fed, pushing back on this notion that we are nearing some pivot in Fed policy, really pushing back on rate cuts. I would even argue that what Jerome Powell said today is also pushing back on those things and that's why you're seeing futures down.

BRAD SMITH: All right. We're going to continue to keep a close eye on futures here this morning, as Powell continues to speak in Sweden.