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President Donald Trump again expressed his frustration with the Federal Reserve, this time just hours after the US central bank raised interest rates.
“We are doing great as a country,” Trump said Wednesday at a press conference in New York. “Unfortunately they just raised interest rates a little bit because we are doing so well. I am not happy about that.”
The Fed’s sixth increase since Trump took office in January 2017 brought the benchmark rate to a range of 2% to 2.25%. Three of those hikes have come this year under Chairman Jerome Powell, the president’s pick to replace Janet Yellen.
“Basically, I’m a low-interest-rate person,” Trump said.
The Fed, created by Congress in 1913, has for a generation been given a wide berth to set monetary policy without interference from elected officials. It has frequently frustrated presidents by raising borrowing costs without regard for election cycles.
At a press conference following the Fed’s decision, Powell said US central bankers were “focused exclusively” on its mandate to pursue full employment and stable prices.
“We don’t consider political factors,” Powell said when asked about pressure from Trump to keep rates low. “That’s who we are. That’s what we do. And that’s just the way it’s always going to be for us.”
Powell and his colleagues are trying to engineer a soft landing for the US economy, now enjoying its second-longest expansion on record, by raising rates just enough to prevent overheating, but not so much that they trigger a recession.
Political interference
The president’s latest comments expanded on interviews, Twitter comments and a private speech over the past three months when Trump has said he was not happy with rate hikes, breaking with a more than two-decade-old norm of presidents avoiding comments on monetary policy out of respect for the Fed’s independence.
Even as Trump complains, the Fed is moving more slowly to raise interest rates than it has in previous economic expansions. Rates are low by historical standards given an unemployment rate below 4% and, in recent months, accelerating economic growth.
The central bank is mandated by Congress to work toward the goals of stable prices and maximum employment, and its structure is designed to insulate decision-making from politics. The president does have influence in appointing governors, though Trump’s appointments including Powell and Vice Chairman Richard Clarida have been policy centrists who have backed gradual rate hikes.
As a presidential candidate, Trump denounced the Fed’s promotion of low rates as creating a “big, fat, juicy bubble,” saying that then-Fed Chair Janet Yellen should be “ashamed” of wanting to bolster the Obama administration’s legacy.
Trump considered re-appointing Yellen for a second term but ultimately chose Powell, who has charted a similar monetary policy.
Though Trump has expressed displeasure with Powell, he doesn’t have the power to fire a Fed chairman. The president appoints members to the Board of Governors in Washington - including the Fed chairman - and can only fire governors “for cause.” The Senate must sign off on replacements.
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