- President Donald Trump laid into the Federal Reserve and Fed Chairman Jerome Powell once again.
- “So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit,” Trump said, using Powell’s nickname.
- Trump also blamed the Fed for the layoffs at General Motors and the stock market’s recent wobbles.
President Donald Trump continued to point the finger at the Federal Reserve for any and all bad economic news during an interview with The Washington Post published Tuesday.
The president blamed the Fed’s interest-rate hikes for the recent stock-market wobbles, as well as General Motors’ big round of layoffs and factory-closure announcement, according to The Post.
“I’m doing deals, and I’m not being accommodated by the Fed,” Trump said. “They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”
Trump also used the opportunity to once again blast Fed Chairman Jerome “Jay” Powell.
“So far, I’m not even a little bit happy with my selection of Jay. Not even a little bit,” the president said. “And I’m not blaming anybody, but I’m just telling you I think that the Fed is way off base with what they’re doing.”
The Fed began a slow and steady interest-rate hiking cycle in December 2015, well before Trump took office, because of the relative strength of the US economy.
But ever since the stock market started stumbling in recent months, and the economy has shown some signs of strain, Trump has blasted the rate hikes as the source of America’s economic ills. The president has even gone so far as to call the Fed’s rate hikes “loco” and said in Tuesday’s interview that “the Fed is a much bigger problem than China.”
Trump has also singled out Powell on multiple occasions for continuing to support the rate hikes. In fact, Treasury Secretary Steven Mnuchin is reportedly now the subject of Trump’s ire because Mnuchin supported Powell during the selection process.
While the stock market’s uneven footing is due to a variety of factors, one of those being the rate hikes, the GM announcement appears to be unrelated. The automaker announced that four US plants in three states would be idled because of falling demand and industry trends moving away from the products made at those factories.
Trump’s attacks raise decades-old fears
Trump’s attacks on the Fed generally worry economists and other market watchers because the abuse harkens back to President Richard Nixon’s pressure on then-Fed Chairman Arthur Burns.
Though done in private, Nixon pressured Burns to keep interest rates low before the 1972 election in order to keep the economy humming. In basic economic theory, the Fed’s interest rates make it more expensive for companies and consumers to borrow money. This helps fulfil the Fed’s goal of keeping inflation low, but also slows economic activity.
Nixon was successful in convincing Burns to keep rates low, which helped to contribute to the disastrous stagflation of the 1970s and damaged the US economy in the long run.
While Trump’s pressure may not be as tactful as Nixon’s – and may in fact backfire – the specter of the incident still looms large over president-Fed interactions.