Congress discusses immigration's substantial economic impact with Federal Reserve Chairman Powell

The U.S. House Committee on Financial Services convened on February 12, 2025, to discuss The Federal Reserve’s Semi-Annual Monetary Policy Report. The meeting featured a significant dialogue regarding the impact of immigration on the economy and monetary policy, as well as the Federal Reserve's role in consumer protection.

The session began with a representative highlighting the Congressional Budget Office's estimate that immigration could increase the labor force by 5.2 million by 2033. This estimate was supported by recent studies indicating that immigrants often take on lower-paying and hazardous jobs, contributing positively to the economy by paying taxes and creating jobs. A notable study from the National Academies of Sciences, Engineering, and Medicine revealed that foreign-born workers contribute approximately $237,000 more in taxes over their lifetimes than they receive in benefits. The representative expressed concern that mass deportations could severely impact economic productivity and spending, particularly in their district.

Chairman Powell of the Federal Reserve acknowledged the indirect influence of immigration on monetary policy, stating that population growth, driven in part by immigration, is a key factor in labor market growth. He confirmed that while the Federal Reserve does not specifically account for immigrants in its interest rate decisions, the overall labor market dynamics are considered.

The discussion also touched on consumer behavior among immigrant populations, particularly regarding fears of deportation affecting their spending habits. Powell noted that while such factors may not be singled out in data analysis, they could influence aggregate economic indicators.

The committee further explored the Federal Reserve's responsibilities, particularly in light of potential changes to consumer protection oversight. Powell explained that prior to the Dodd-Frank Act, the Federal Reserve, along with other regulatory bodies, conducted consumer examinations and enforcement for banks. He indicated that while the Federal Reserve could potentially reassume some of these responsibilities, any changes would require legislative action.

In conclusion, the meeting underscored the complex interplay between immigration, economic growth, and monetary policy, while also addressing the Federal Reserve's evolving role in consumer protection amidst ongoing regulatory discussions. The committee's next steps remain to be seen as they continue to evaluate these critical issues.