Powell: Fed needs independence to fight inflation

STORY: U.S. investors seeking insight on possible changes to the Federal Reserve's interest rate policy were tuned to an event in Sweden on Tuesday.

"It's a pleasure and an honor to be here today."

But Fed Chair Jerome Powell used a speech he delivered there to focus on the bigger picture... and why the Fed’s independence from political influence is central to its ability to battle inflation.

"Restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy. The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors."

Powell steered clear of discussing the Fed's monetary policy outlook at the forum in Stockholm, which was sponsored by the Swedish central bank.

His speech failed to assuage investors rattled by remarks earlier this week from two other Fed policymakers, who both indicated that another 50 basis point rate hike was on the table at the next Fed meeting.

The comments had dampened hopes that U.S. inflation had peaked and that the Fed may soon signal an end to its rate hiking cycle.

In Sweden, Powell added that maintaining independence from political influence also requires the Fed to stay out of issues like climate change that are beyond its congressionally-established mandate.

"Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals. We are not, and will not be, a 'climate policymaker.'"

After nearly a year of aggressive rate hikes designed to slow the U.S. economy and bring down soaring prices, a recent slowdown in hiring and wage growth has lifted hopes of cooler inflation ahead.

Some experts believe it's also raised the odds of the Fed orchestrating a soft landing as opposed to triggering a recession, which some economists and CEOs have warned could emerge this year.