President Donald Trump ratcheted up his pressure on the Federal Reserve, saying that if the central bank had “not mistakenly raised interest rates," the US gross domestic product would be higher and markets “would be in a better place."
The president’s comment, in a Twitter post on Friday afternoon, was yet another shot across the bow of Fed Chairman Jerome Powell, who Trump has repeatedly rebuked since the Fed raised borrowing costs four times last year. Trump even discussed firing Powell, Bloomberg News reported on Dec. 21.
“Had the Fed not mistakenly raised interest rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3.0% GDP, & Stock Market, would have both been much higher & World Markets would be in a better place!" the president said in the tweet.
Earlier Friday, White House chief economic adviser Larry Kudlow called on the Fed to “immediately" cut interest rates by a half percentage point, escalating the Trump administration’s fight with the central bank and challenging its independence.
Kudlow “would love to see" such a move, according to a report by Axios, which cited an interview Friday with the director of the National Economic Council. Later on CNBC, Kudlow said a rate cut would protect the strength of the American economy from weakness abroad, though he said such a move isn’t needed immediately and the “underlying economy" isn’t slowing.
The comments follow a report saying Stephen Moore, whom Trump plans to nominate to the Fed’s board, also advocated a half-point cut. Fed policy makers last week projected they would keep interest rates on hold for the year, compared with their December forecast for two rate hikes, as slowing global growth weighs on the U.S. economy. The Fed’s target benchmark rate stands in a range of 2.25 percent to 2.5 percent.
Fed spokesman David Skidmore declined to comment on Kudlow’s remarks, which came days after Moore told the New York Times that the central bank should ease. Skidmore also declined to comment on Trump’s tweet.
Moore is a conservative pundit and supporter of the president who co-authored the book “Trumponomics: Inside the America First Plan to Get Our Economy Back on Track."
Kudlow, said the president has “had his views on Chair Powell. They had dinner together. I couldn’t make the dinner. He’s our chairman. We’re not going to displace him."
Trump dined with Powell at the White House on Feb. 4, the central bank announced at the time in a statement that said its chief did not discuss his expectations for monetary policy.
Trump’s criticism -- in interviews and on Twitter -- disregarded long-standing White House practice of avoiding public comment on monetary policy out of respect for the Fed’s independence, which is an article of faith among investors who purchase U.S. Treasuries. Kudlow’s direct demand for a rate cut took things up a notch.
“It’s more than poor form, it crosses a line," said Diane Swonk, chief economist at Grant Thornton in Chicago.
Swonk said she’s confident the Fed under Powell will continue to ignore White House pressure when making monetary policy decisions, but Kudlow’s remarks help chip away at the central bank’s independence.
“If it’s OK for one White House to do it, maybe it’s OK for another White House to do it, and over time that may have a cumulative effect," she said. “We know that countries that allow their central bank to be run by the political whims of those governing do extremely poorly over time."
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.