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By Gabe Whisnant
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Federal Reserve Chair Jerome Powell reassured Americans on Tuesday that their bank accounts remain secure amid the President Donald Trump administration's decision to shut down the Consumer Financial Protection Bureau (CFPB), a consumer financial regulatory agency.
Testifying before the Senate Banking Committee, Powell emphasized that "bank accounts overall across the economy are safe" and protected by government deposit insurance.
Newsweek reached out to the Treasury Department via email on Tuesday afternoon for additional information.
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Why It Matters
His remarks came amid heated partisan debate, as Republican and Democratic senators clashed over the Trump administration's recent order to halt the CFPBs supervisory and rule-making activities.
The CFPB was established in the aftermath of the 2008 financial crisis. Senator Elizabeth Warren, a Massachusetts Democrat and key architect of the CFPB, expressed apprehension about the agency's shutdown. She stated, "I'd be really worried about doing business with a giant bank when there's no cop on the beat."
What To Know
Warren urged Powell to ensure that the Federal Reserve does not become complicit in what she termed an "illegal act" and to uphold the Fed's reputation by continuing to support the CFPB, which receives its funding from the central bank.
In contrast, Republican senators downplayed the potential negative impacts of dismantling the CFPB. Senator Pete Ricketts of Nebraska argued that state agencies could still provide necessary consumer protections.
During the hearing, Powell also addressed questions regarding the Federal Reserve's interest rate policies. While acknowledging that higher borrowing costs have been a consequence of the Fed's actions, he noted that the measures have been instrumental in reducing inflation from its pandemic-induced highs. Inflation has decreased from a peak of 7.2 percent in June 2022 to the current rate of 2.6 percent, approaching the Fed's target of 2 percent.
Powell largely sidestepped questions about the potential effects of additional tariffs proposed by Trump on inflation and the Federal Reserve's key interest rate, which currently stands at about 4.3 percent, down from a two-decade high of 5.3 percent last year.
Instead, he reiterated his stance that with the economy in relatively strong shape, the Fed has the flexibility to take a wait-and-see approach before making any decisions on further rate cuts. Powell emphasized that the central bank would monitor how tariffs impact economic growth and inflation before adjusting its policy. While the Fed lowered its key rate three times last year, it opted to keep rates unchanged last month.
What People Are Saying
Senator Pete Ricketts during Tuesday's hearing: "To say that nobody is out there looking after consumers is inaccurate, and we ought not to try and scare consumers right now."
Federal Reserve Chair Jerome Powell during Tuesday's hearing: "We do not need to be in a hurry to adjust our policy stance."
What Happens Next
Looking ahead, Powell suggested that with the economy generally healthy, the central bank can afford to wait and observe how economic conditions evolve before making further rate cuts.
Update 2/11/25, 3 p.m. ET: This story has been updated with additional information.
Reporting by the Associated Press contributed to this story.
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