The Fed Faces Criticism as It Wades Into Climate and Equity Issues

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The Federal Reserve is proudly politically independent. That makes key discussions around climate change and racial inequity a balancing act.

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In mid-2019, Jerome H. Powell fielded a question from reporters that he often faced in those days: Were politics, and particularly a pressure campaign coming from Donald J. Trump’s White House to cut interest rates, influencing the Federal Reserve’s policy stance?

Mr. Powell, the central bank chair, tried as he had for months to convince the public that he and his colleagues were not bowing to the Republican administration. “We never take into account political considerations,” he said.

Nearly two years later, the Fed again faces warnings of politicization — but this time from Republican lawmakers who say it risks veering out of its lane as it focuses on what they portray as social priorities. Fed officials have ramped up their attention to climate change risks, racial economic equity and labor market inclusion, issues that many economists say are critical to the nation’s future, but which Washington often treats as the purview of the partisan left.

As the Fed has taken a more expansive view of how it should go about achieving full employment, stable inflation and financial stability — the loosely defined tasks Congress handed it — conservative economists and lawmakers have sent letters and made statements expressing worry that it will stray too far. One of the most prominent critics is Patrick J. Toomey, a Republican from Pennsylvania and a powerful member of the Senate Banking Committee, who has labeled research by Fed regional banks as “social studies essays.”

Such complaints don’t carry much immediate threat, with Democrats in charge of Congress and the White House and Republicans unable to rein in the Fed legislatively. But the mere accusation that the Fed is bowing to Democrats is a striking inflection point for a central bank that has