Federal Reserve Chairman Powell Congressional Hearing: Emphasizes Strong US Economy, Explicitly Opposes Central Bank Digital Currency

On Tuesday, Federal Reserve Chairman Powell attended the semi-annual monetary policy hearing of the House Financial Services Committee in the United States Congress. During the hearing, Powell responded to various aspects such as the US economic situation, financial regulation, the impact of government policies on the economy, and banking sector risks. He emphasized that the US economy remains robust, the Federal Reserve will maintain patience in decision-making, and focus on potential risk factors that could affect economic growth. Powell stated at the hearing that the US economy continues to show strong resilience. Despite the impact of various factors, GDP growth remains at a healthy level, and the job market shows a stable trend. "The US labor market has returned from extreme tightness to a more balanced level. Although job growth has slowed down, overall, the market conditions are still good," he emphasized. He noted that the job market is not the main source of current inflation pressure, wage growth has moderated, and is consistent with productivity growth. Furthermore, Powell mentioned that consumer spending remains strong, business investment is picking up, and both manufacturing and service sector activities are in expansion. These factors indicate that the US economy still has strong resilience and there are no obvious signs of a recession. During the hearing, some lawmakers raised concerns about the recent policy adjustments by the Trump administration in areas such as trade, taxes, immigration, and regulation and their potential impact on economic growth. Powell stated that these policy changes have indeed increased economic uncertainty, and the Federal Reserve will closely monitor their potential impact. He emphasized the need for patience and waiting for further clarity on the effects of policies on the economy, ensuring that policy decisions will be based on data and economic developments, not short-term political factors. Powell emphasized that the Federal Reserve will not comment on trade policy but acknowledged that trade uncertainty may affect business investment decisions. He pointed out that tariffs may push up the prices of imported goods, putting some pressure on inflation, but it is still too early to evaluate their long-term economic impact. Aside from monetary policy and economic growth, lawmakers also expressed concerns about the rising US fiscal deficit and government debt levels. According to US Treasury data, US 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 will 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 Department. He urged Congress to adopt responsible fiscal policies to ensure fiscal sustainability. Moreover, Powell mentioned that despite the current high level of US debt, there is still strong demand for US treasuries in the market, and bond yields remain within manageable ranges. He warned that if the debt issue is not resolved in the long term, it could pose greater risks to the economy. Some lawmakers mentioned President Trump's repeated public criticism of Federal Reserve policies and questioned whether the president has the authority to dismiss Powell or other Fed officials. Powell unequivocally stated that the Fed's independence is protected by law, and the president does not have the power to remove Fed officials. "According to the law, the term of Fed governors is fixed, and they can only be dismissed under specific circumstances that meet legal standards," Powell emphasized. He stated that as an independent institution, the Fed's decisions are not influenced by political factors but are based on economic data and long-term goals. He added that the Fed's independence is crucial for maintaining market confidence, and any attempt to interfere with the Fed could disrupt financial market stability. Some lawmakers questioned Powell about the recent Silicon Valley bank collapse and asked him to explain the Fed's measures in bank regulation. Powell acknowledged that this incident exposed flaws in the banking regulatory system and needs to be improved. "The collapse of the Silicon Valley bank reminds us that risk management in the banking industry is crucial, and the Fed needs to do better in regulation," Powell said. He noted that the Fed has taken a series of measures to strengthen regulation of regional banks to prevent similar incidents from happening again. Powell also mentioned that the Fed is considering stricter capital requirements for mid-sized banks to ensure they have enough risk-bearing capacity. Furthermore, the Fed is studying how to enhance liquidity management in banks to prevent sudden deposit outflows from causing bank failures. He emphasized that the overall US banking system remains sound, and depositors do not need to worry about the security of the banking system. During the hearing, Republican Senator Bernie Moreno asked Powell a direct question: "During your term as Fed chair, we will not launch a central bank digital currency, right?" Powell answered 'yes' without hesitation, clearly stating that the Fed will not issue its own digital currency (CBDC). This statement ended years of speculation about whether the Fed would follow other countries in launching a central bank digital currency. As early as 2022, the Fed released a detailed research report analyzing the pros and cons of CBDC but did not make a final decision. In recent years, several Fed officials have expressed concerns about privacy protection and financial stability issues related to CBDC, and the likelihood of legislation promoting CBDC has decreased further under the Republican-controlled Congress. Powell also stated that the Fed has launched the FedNow payment system, an instant payment service that can meet many functions envisioned for CBDC, so the Fed does not see the need to issue a central bank digital currency.