Friday, April 20, 2018

Is Trump Going to Interfere With Federal Reserve Monetary Policy?

Can Trump get into Jay Powell's head.
Sam Fleming at the Financial Times notes:
The Trump administration is proving more willing to comment on Federal Reserve rate moves after saying little about central bank policy in its first year, in a development that risks unsettling financial markets.

Donald Trump has never made a secret of his appetite for cheap borrowing costs, calling himself a low-rates person. But in his first year as president his administration shied away from discussing the central bank’s decisions. This was partly under the influence of Gary Cohn, the former National Economic Council director, who understood the market sensitivity of its work.

Recently, officials have become more vocal. Peter Navarro, the president’s trade adviser, has made perhaps the most direct intervention, telling CNBC this month that he was “a little puzzled when the Fed announced three rate hikes before the end of the year”, arguing there was no inflation to speak of in the US economy. This week, Mr Trump used Twitter to accuse Russia and China of devaluing their currencies while the US “keeps raising interest rates”, saying the situation was not acceptable.
Trump's economic advisers and Trump himself may comment more about Fed policy but it is difficult to see how they will have much influence unless Trump, or someone on his team, can somehow get into the head of Jay Powell the way Richard Nixon got into the head of Arthur Burns by using Alan Greenspan.

-Robert Wenzel  

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