- President Donald Trump has repeatedly lashed out at the Federal Reserve about rising interest rates too quickly.
- His comments break with a precedent of presidents not commenting on monetary policy.
- As the Federal Open Market Committee shifts its rate path, there has been renewed focus on Trump’s criticism.
“Going loco.” “Too aggressive.” “The economy’s only problem.” “My biggest threat.”
Since taking office, President Donald Trump has called the Federal Reserve many things. “Independent” has not often been one of them.
From pointed tweetstorms to questions on whether Trump might fire Chairman Jerome Powell, whom he handpicked to lead the central bank, anger over rising interest rates has long been apparent in the Oval Office.
Now, against the backdrop of a shifting monetary policy path, that has some observers increasingly concerned about the Fed’s reputation as an institution that is independent from political influence.
“It is important for the Fed to be viewed as independent,” Janet Yellen, the former Fed chair, said Wednesday on CNBC. “And I worry that the comments threaten public confidence.”
That came days after Trump and Powell, along with Treasury Secretary Steven Mnuchin and Fed Vice Chairman Richard Clarida, had dinner at the White House. A standard practice that allows a president to hear a Fed chief’s views of the economy, such meetings have taken place in past administrations.
The Fed released a statement after the dinner to underscore its commitment to policy independence, saying Powell “did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook.”
But as far as optics, some observers say the timing couldn’t have been worse. Last week, in a reversal, the Federal Reserve Open Market Committee signalled its multiyear string of steady increases could be coming to an end.
Citing the recent government shutdown and expectations for a global slowdown in growth, officials said they could be “patient” on monetary policy in coming months. The move came as a surprise to many, sending financial markets sharply higher.
“I do worry a bit that the meeting might have contributed to the perception that Powell was swayed by the president’s public remarks,” said Ken Kuttner, a former staff economist at the Fed.
“Normally, a meeting of this sort would be uneventful,” he added. “But in the context of Trump’s recurring public upbraiding of Powell, it’s not surprising that there would be speculation that Trump would use the meeting to influence policy.”
Nergiz Dincer, an economist who has written several National Bureau of Economic Research papers on central bank independence, said it was odd the Trump administration didn’t issue its own readout of the meeting, as has been done under past presidents. The White House did not respond to an email requesting comment.
Likewise, MSNBC’s David Gura wrote on Twitter: “It is good to know what the Fed chair says he said, but this is a one-sided readout. What did the president say? What questions did he ask?”
To be sure, others saw the dinner as business as usual. Alice Rivlin, who served as vice chair of the Federal Reserve during the Clinton administration, said that while she sees how it may have raised eyebrows, she wasn’t worried.
“I don’t know how much of the public pays attention to this,” she said. “The markets do, but I think the markets understand Jay Powell is a strong defender of central bank independence.”
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