Federal Reserve Chairman Jerome Powell on Friday said central bank independence doesn’t just mean having the ability to pick interest rates without political interference, but set regulations as well.
Powell’s remarks, in celebration of the 350th anniversary of Sweden’s Riksbank, comes just a day after President Donald Trump signed into law bank deregulation and comes ahead of the Fed’s expected efforts to slash the burdens on banks.
Related: Newly signed bank deregulation law sets stage for Fed to take further steps
“While the focus is often on monetary policy independence, research suggests that a degree of independence in regulatory and financial stability matters improves the stability of the banking system and leads to better outcomes,” Powell said.
Footnotes indicate what Powell meant in particular: “technical implementation and oversight are two areas where instrument independence may be especially helpful.”
The Fed is voting next week on proposed changes to the Volcker Rule that bans banks from speculating. The Fed is expected to make it easier for big banks such as Citi C, -0.91% , Goldman Sachs GS, -0.12% and J.P. Morgan Chase JPM, -0.26% to prove that market-making activities don’t violate the Volcker Rule prohibition.
Powell’s speech comes a day after the Senate confirmed Jelena McWilliams to lead the Federal Deposit Insurance Corp. McWilliams, formerly a lawyer at Fifth Third Bancorp FITB, -0.79% as well as a Senate Banking Committee aide, is expected to be more amenable to loosening regulations than Martin Gruenberg, her Obama-appointed predecessor.