Federal Reserve Chairman Jerome Powell appears to be planted firmly in the middle of a political sea change in Washington.
His prepared message on Tuesday was broadly unchanged since the Fed held interest rates steady last month: the economy is strong, inflation will come down eventually, the labour market is in a good place and he is happy to keep rates at their current level for now.
“We are attentive to the risks to both sides of our dual mandate, and policy is well positioned to deal with the risks and uncertainties that we face,” he told the Senate Banking committee.
But much of the attention was focused on the Fed's role as a regulator, following efforts by President Donald Trump to shut down a supervising bureau founded after the 2008 global financial crisis and Elon Musk's successful attempts at gaining access to the Treasury department's payments system.
The most recent effort involved effectively shutting down the Consumer Financial Protection Bureau (CFPB), whose purpose is to oversee financial services that US consumers use, including credits cards and mortgages. The CFPB is an independent bureau within the Fed.
In one exchange with Democratic Senator Elizabeth Warren, Mr Powell was asked who would examine banks such as Wells Fargo or JP Morgan if the CFPB was not providing the monitoring. Mr Powell responded: “I can say no other federal regulator.”
In another exchange with Democratic Senator Catherine Cortez-Masto, Mr Powell acknowledged the Fed has a role only in providing consumer protection for small banks with $10 billion or less in assets and that shutting down the CFPB would lead to a gap in regulation.
The Fed chairman also sought to ease concerns that the Treasury Department's payments system remains safe after Mr Musk and Doge gained access to the federal payments system, which controls the flow of $6 trillion annually. When asked by Senator Mike Rounds, a Republican, if the system is safe today, Mr Powell answered: “I believe it is.”
“And I will tell you, we are very strongly committed to the integrity, efficacy, resilience and all those things of this system. And you know, people do depend on this in a big way, and we're committed to that,” Mr Powell said.
He also said he does not believe Mr Musk or Doge have tried to access the Fed's data or its systems.
Tuesday's exchanges underscore the shifting political landscape Mr Powell is in as he navigates to push through new banking regulation and lower interest rates under the new Trump regime.
No stranger to operating under Mr Trump and at times becoming the target of his anger, Mr Powell declined to comment on how the new president's policies would affect the Fed's outlook.
“It's not the Fed's job to make or comment on tariff policy,” Mr Powell said in one exchange, before suggesting it would be “unwise to speculate what we really don't know” towards the second half of his testimony.
Mr Trump lashed out at Mr Powell after the Fed held rates steady last month before later rowing back on that criticism. The President previously has demanded the central bank immediately cut rates, although he has no say in the Fed's decisions.
Mr Musk at the weekend suggested the Fed should be under greater scrutiny. “All aspects of the government must be fully transparent and accountable to the people. No exceptions, including, if not especially, the Federal Reserve,” he posted on X.
Mr Trump has also previously suggested he could fire Mr Powell before again rowing back on that comment. It is unclear if he has the legal authority to do so.
For his part, the Fed Chairman's position remains resolute: the President does not have the authority to dismiss him.
But the Fed has made some decisions to operate while Mr Trump looms over it, including taking down pages on its website about diversity, equity, and inclusion (DEI) programmes, and withdrawing from the Network for Greening the Financial System (NGFS). Mr Powell has framed the former decision as in line with an executive order by the President and said the NGFS exceeded the Fed's statutory mandate.
Michael Barr, the architect of the Fed's Basel III proposals, also announced plans to step down from his position as vice chairman for supervision after Mr Trump threatened to sack him.
Mr Barr contended the President did not have the authority to do so but said a protracted legal fight could distract the Fed from its mission.
