But Mujagic also praises the content of Powell’s speech in the Swedish capital Stockholm. “He decided to talk about foreign trust in the Fed and central bank independence. To improve the situation, he said that the bank should mainly do what people know and for which the bank has the mandate,’ describes Mujagic. Powell then said the Fed should stay away from areas that are not understood and are not mandated.
‘The example he set is the fight against climate change. She called it a noble goal. But if you make a policy about it, it means that the situation is redistributed between companies, individuals, sectors and countries. But the people who have to implement the policy on this must have been chosen for it. Central bankers aren’t named for this, Powell said,” describes Mujagic, who hears a smirk at the European Central Bank.
podcasts | Macro with Boot and Mujagić
‘ECB has difficulty with this’
“He’s not saying it’s not important and that it doesn’t affect central bankers’ scope of activity, but he’s saying it’s something other than the actual implementation of policy,” the economist said. ‘The ECB has a little more difficulty with this. Because as soon as you implement the policy, you are forced to choose which companies are green or gray and which companies are doing well or not. Powell’s point is that this puts the image of independence at risk.”
Mujagic therefore believes that the ECB is walking on ice because of the central bank’s climate policy. “The independence and credibility that the rest of the world has in you is the most important thing you have. You shouldn’t risk it.