Federal Reserve Chairman Jerome Powell's Congressional Hearing: Emphasizes the robustness of the U.S. economy and clearly opposes central bank digital currency

According to the Zhitong Finance APP, on Tuesday, Federal Reserve Chairman Jerome Powell attended the semi-annual monetary policy hearing of the U.S. House Financial Services Committee. During the hearing, Powell responded to various aspects such as the U.S. economic situation, financial regulation, the impact of government policies on the economy, and risks in the banking sector. He emphasized that the U.S. economy remains robust, and the Federal Reserve will maintain patience in its decision-making while paying attention to risk factors that may affect economic growth. Powell stated at the hearing that the U.S. economy continues to show strong resilience. He pointed out that despite being influenced by multiple factors, GDP growth remains at a healthy level, and the labor market shows stable trends. "The U.S. labor market has returned from a previously extreme tight state to a more balanced level. Although job growth has slowed, overall, market conditions remain good." He emphasized that the labor market is not the main source of current inflationary pressures, and wage growth has moderated, aligning with productivity growth. Additionally, Powell mentioned that consumer spending remains strong, corporate investment has rebounded, and both manufacturing and service sector activities are still in an expansion phase. These factors indicate that the U.S. economy continues to possess strong resilience and has not shown obvious signs of recession. During the hearing, some lawmakers expressed concern about the potential impact of recent policy adjustments by the Trump administration in areas such as trade, taxation, immigration, and regulation on economic growth. Powell stated that these policy changes have indeed increased uncertainty regarding the economic outlook, and the Federal Reserve will closely monitor their potential impacts. "We must remain patient and wait for further clarity on the impact of policies on the economy. The Federal Reserve's policy decisions will continue to be based on data and economic developments, rather than short-term political factors." Powell emphasized that the Federal Reserve would not comment on trade policies but acknowledged that trade uncertainty could affect corporate investment decisions. He noted that tariffs could raise the prices of imported goods, thereby exerting some pressure on inflation, but it is still too early to assess their long-term economic impact. In addition to monetary policy and economic growth, lawmakers also expressed concerns about the rising fiscal deficit and government debt levels in the U.S. According to data from the U.S. Treasury, government debt has surpassed $34 trillion, and the fiscal deficit continues to widen. When asked about the impact of government debt on the economy, Powell stated, "In the long run, high government debt can limit the flexibility of fiscal policy and affect future economic growth." He emphasized that the Federal Reserve's responsibility is to manage monetary policy, while fiscal policy is the responsibility of Congress and the Treasury. He called on Congress to adopt responsible fiscal policies to ensure fiscal sustainability. Furthermore, Powell mentioned that despite the current high level of U.S. debt, market demand for U.S. Treasury bonds remains strong, and Treasury yields are still within a controllable range. He warned that if the debt issue is not resolved in the long term, it could pose greater risks to the economy. Some lawmakers referred to Trump's repeated public criticisms of the Federal Reserve's policies and questioned whether the president has the authority to dismiss Powell or other Federal Reserve governors. In response, Powell clearly stated that the independence of the Federal Reserve is protected by law, and the president does not have the authority to remove Federal Reserve officials. "According to the law, the terms of Federal Reserve governors are fixed, and they can only be removed under specific circumstances that must meet legal standards." "Powell emphasized that the Federal Reserve, as an independent institution, makes decisions based on economic data and long-term goals, free from political interference. He added that the independence of the Federal Reserve is crucial for maintaining market confidence, and any attempts to intervene in the Federal Reserve could undermine the stability of financial markets. Some lawmakers questioned Powell regarding last year's Silicon Valley Bank collapse, asking him to explain the Federal Reserve's measures in bank regulation. Powell acknowledged that the incident exposed vulnerabilities in the banking regulatory system that need to be improved. "The collapse of Silicon Valley Bank reminds us that risk management in the banking sector is crucial, and the Federal Reserve needs to do better in regulation," Powell stated. He pointed out that the Federal Reserve has already taken a series of measures to strengthen oversight of regional banks to prevent similar incidents from occurring again. Powell also mentioned that the Federal Reserve is considering implementing stricter capital requirements for mid-sized banks to ensure they have sufficient risk resilience. Additionally, the Federal Reserve is studying how to improve banks' liquidity management to prevent sudden deposit outflows that could lead to bank failures. He emphasized that the U.S. banking system remains robust overall, and depositors do not need to worry about the safety of the banking system. During the hearing, Republican Senator Bernie Moreno posed a direct question to Powell: "During your tenure as Federal Reserve Chair, we will not launch a central bank digital currency, right?" Powell answered 'yes' without hesitation, clearly stating that the Federal Reserve will not launch its own digital currency (CBDC). This statement ended years of speculation about whether the Federal Reserve would follow other countries in launching a central bank digital currency. As early as 2022, the Federal Reserve released a detailed research report analyzing the pros and cons of CBDCs but did not make a final decision. In recent years, several Federal Reserve officials have expressed concerns about issues such as privacy protection and financial stability regarding CBDCs, and under the Republican-led Congress, the likelihood of advancing legislation for CBDCs has further decreased. Powell also stated that the Federal Reserve has launched the FedNow payment system, which provides real-time payment services that can fulfill many of the functions envisioned for CBDCs, thus the Federal Reserve does not see the need to issue a central bank digital currency