U.S. President Donald Trump on Thursday cast aside concerns about the Federal ReserveB次元官网网址檚 independence, saying he was B次元官网网址渘ot happyB次元官网网址� with the FedB次元官网网址檚 recent interest rate increases.
Trump told CNBC in an interview: B次元官网网址淚 donB次元官网网址檛 like all of this work that weB次元官网网址檙e putting into the economy and then I see rates going up.B次元官网网址�
Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018. Its rate hikes are meant to prevent the economy from overheating and igniting high inflation. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth. In particular, the FedB次元官网网址檚 most recent rate hikes could dilute some of the benefit of the tax cuts Trump signed into law last year.
The president acknowledged that his comments about the Fed would likely raise concerns. The central bank has long been seen as needing to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.
The FedB次元官网网址檚 dual mandate is to maximize employment and stabilize prices. By maintaining its independence, the central bank can make politically contentious decisions to combat economic challenges, like the huge bond purchases it made after the 2008 financial crisis to help drive down long-term rates to support the economy. That policy drew rebukes from many Republican lawmakers.
In February, Jerome Powell, TrumpB次元官网网址檚 hand-picked choice, became Fed chairman. Last week, Powell said in an interview with the radio program Marketplacethat he didnB次元官网网址檛 expect to face pressure from the White House.
B次元官网网址淲e have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns,B次元官网网址� Powell said. B次元官网网址淲e do our work in a strictly nonpolitical way, based on detailed analysis, which we put on the record transparently.B次元官网网址�
He added, B次元官网网址淣o one in the administration has said anything to me that really gives me concern on this front.B次元官网网址�
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The reaction to TrumpB次元官网网址檚 remarks in the financial markets was muted. The U.S. dollar fell to 112.46 yen from 112.84 yen earlier, and yields on Treasurys dipped slightly.
After TrumpB次元官网网址檚 interview with CNBC was made public, Lindsay Walters, a White House spokeswoman, said the president B次元官网网址渞espects the independence of the Fed.B次元官网网址�
B次元官网网址淭he presidentB次元官网网址檚 views on interest rates are well-known, and his comments today are a reiteration of those long held positions, and public comments,B次元官网网址� Walters said.
Speaking about Fed policy in his interview with CNBC, Trump said he is B次元官网网址渓etting them do what they feel is best.B次元官网网址�
But his comments raised alarms, including with some former Fed officials who saw in his remarks a possible effort to apply public pressure on the central bank.
B次元官网网址淚 am not pleased,B次元官网网址� said Carl Tannenbaum, a former Chicago Fed official and chief economist at Northern Trust. B次元官网网址淭he remarks certainly arenB次元官网网址檛 an immediate threat to Fed independence, but they break with the tradition of respectful distance.B次元官网网址�
Randall Kroszner, a former Fed governor, said the central bank has withstood political pressure before and will continue to do so under PowellB次元官网网址檚 leadership.
B次元官网网址淭he Fed has often faced political pressures B次元官网网址� from Congress, presidents, Treasury secretaries and innumerable outside groups,B次元官网网址� said Kroszner, an economics professor at the University of Chicago. B次元官网网址淢y experience at the Fed is consistent with what Jay Powell recently said B次元官网网址� being non-political is deep in the FedB次元官网网址檚 DNA B次元官网网址� and I believe that Jay will keep it that way.B次元官网网址�
During the 2016 presidential campaign, Trump was highly critical of the Fed and accused its policymakers of keeping rates at ultra-low levels to favour Democrats. But he also told CNBC during the campaign that he is a B次元官网网址渓ow interest-rate-person.B次元官网网址�
Past efforts to apply political pressure on the Fed have sometimes hurt the economy. President Richard Nixon encouraged Arthur Burns, the Fed chairman at the time, to help boost economic growth ahead of NixonB次元官网网址檚 1972 landslide re-election. That episode ultimately triggered runaway inflation that took a decade to tame and required raising the FedB次元官网网址檚 policy rate above 15 per cent B次元官网网址� more than eight times the rateB次元官网网址檚 current average.
George H.W. BushB次元官网网址檚 administration complained that he felt the FedB次元官网网址檚 failure to cut rates more quickly in 1992 contributed to his re-election defeat that year.
When Robert Rubin led President Bill ClintonB次元官网网址檚 National Economic Council, he adopted a rule of never commenting on the FedB次元官网网址檚 actions B次元官网网址� a policy that was subsequently followed by the George W. Bush and Obama administrations.
The Associated Press
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