Trump trespasses on Fed's independence by blasting Powell's rate hikes

Marco Green
July 20, 2018

President Donald Trump criticised the USA central bank in comments aired Thursday, saying its course of interest rate increases counteracted his efforts at growing the economy.

"I don't like all of this work that we're putting into the economy and then I see rates going up", he said, according to CNBC.

If there is one big-time bipartisan no-no for presidents, it's failing to respect the independence of certain key institutions, among them the monetary policy giants of the Federal Reserve Board. "Looking ahead, my colleagues on the FOMC and I expect that, with appropriate monetary policy, the job market will remain strong and inflation will stay near 2 percent over the next several years" said Powell in prepared congressional testimony on the central bank's semi-annual Monetary Policy Report on the USA economy Tuesday.

"I put in a very good man in the Fed", Trump said, referring to Powell.

"I'm not thrilled, because we go up and every time you go up they want to raise rates again", Trump told CNBC.

Central bank officials, including chair Jerome Powell, have raised interest rates twice already this year and were gearing up for two more increases before the end of 2018. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth.

A number of factors, including inflation and higher interest rates, could soon counteract the fiscal stimulus, however, and economists say the risk of recession in the coming years is growing.

Although he does not approve with recent hikes, President Trump followed up by saying he put a "very good man in" at the Fed.

The U.S. dollar fell to 112.46 yen from 112.84 yen earlier, and yields on Treasurys dipped slightly.

"I'm not thrilled", he said in an interview, according to CNBC.

Mr Trump said he was unconcerned that his remarks might spark criticism as he was merely stating long-held personal views.

"This is such a risky thing for the Fed, and for the president, and for central bank independence", said Peter Conti-Brown, a Fed historian at the University of Pennsylvania's Wharton School.

Former Dallas Fed president Richard Fisher told CNBC that Trump was off course.

During the 2016 presidential campaign, Trump was highly critical of the Fed and accused its policymakers of keeping rates at ultra-low levels to favor Democrats.

Other reports by Click Lancashire

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