Trump steps up his attacks on Federal Reserve’s rate hikes

In recent memory, no president has been so openly critical of the central bank.

By Martin Crutsinger / Associated Press

WASHINGTON — President Donald Trump on Thursday escalated his attack on the Federal Reserve’s interest rate increases, asserting that “the Fed is out of control” and blaming it for this week’s plunge in stock prices.

“It’s a correction that I think is caused by the Federal Reserve with interest rates,” Trump said when asked by reporters in the Oval Office about the stock market swoon.

He added, “We have interest rates going up at a clip that’s much faster than certainly a lot of people, including myself, would have anticipated. I think the Fed is out of control.”

It was the latest in series of recent barrages the president has unleashed at the Fed, which under his hand-picked chairman, Jerome Powell, has been gradually raising rates as the economy has strengthened to prevent a run-up in inflation. Critics have expressed worry that the president’s attacks threaten the Fed’s ability to operate free of political pressure.

Though Trump said he objected to the Fed’s continual rate hikes, he said in response to a question that he would not seek to oust the chairman.

“No, I’m not going to fire him,” Trump said. “I’m just disappointed at the clip” that rates are being raised.

Trump’s blunt public criticism of the Fed, which began this summer, is without precedent. His predecessors have taken care not to directly attack the central bank’s rate policy out of concern that such criticism could backfire. Investors might, for example, question whether the Fed would feel free to keep raising rates, if it felt it necessary to control inflation.

Conversely, some worry that the central bank might even raise rates faster than it otherwise would, to demonstrate the independence of its inflation-fighting policy.

From its beginning, the Fed was designed to insulate it from political pressures. A full term on the seven-member Fed board lasts 14 years — a lengthy period that was seen as liberating Fed officials from any fear that their rate decisions might cost their jobs.

The law creating the Federal Reserve says the officials can be “removed for cause.” That issue has never arisen in regard to an individual Fed official. The courts ruled decades ago in a case involving a member of the Federal Trade Commission that “for cause” meant more than a policy disagreement with the president.

No Fed chairman has ever been fired by a president, though some have been denied a subsequent four-year term as chairman. President Jimmy Carter in 1979 removed G. William Miller as Fed chairman by offering him the job of Treasury secretary. That gave Carter an opening to make Paul Volcker the new Fed chairman, someone the Carter administration regarded as better equipped to combat high inflation.

In recent memory, no president has been so openly critical of the central bank. The last president to voice any criticism in public was George H.W. Bush. Bush blamed Alan Greenspan’s slowness in cutting interest rates for his failed run for a second term in 1992. But Bush’s complaint about the Fed came years after he had left office.

While campaigning in 2016, Trump had been highly critical of the Fed, contending that under Chair Janet Yellen, the Fed was keeping rates abnormally low to try to help Democrats. But until this summer, he had lodged no criticism of the Fed’s rate hikes.

In recent days, he has escalated his attacks. In a late night phone call Wednesday with Fox News, Trump complained: “The Fed is going wild. I don’t know what their problem is. They are raising interest rates and it’s ridiculous. … The Fed is going loco, and there is no reason for them to do it and I’m not happy about it.”

Larry Kudlow, Trump’s top economic adviser, said in a CNBC interview Thursday that he had talked with the president about his Fed criticism and thought “there’s nothing new here” in Trump’s comments.

“We know the Fed is independent,” Kudlow said. “The president is not dictating policy to the Fed. They are independent; they’re going to do what they’re going to do.”

Powell, when asked about Trump’s criticism in recent weeks, has chosen not to respond directly. Rather, he has stressed that the central bank handles its job without regard to politics.

Powell has said that Fed officials think their approach to raising rates at a gradual pace will extend the current expansion by keeping inflation under control.

Donald Kohn, who served for eight years on the Fed board, said he thought Trump’s criticism would have no effect on Fed policy. But Kohn expressed concern about its impact on the central bank’s standing.

“I do worry about bringing the Fed into what is really a pretty toxic political environment and undermining confidence in the Fed,” Kohn said Thursday in a CNBC interview.

Talk to us

More in Herald Business Journal

Small business relief effort inundated with 850 applications

The economy in and around Everett has struggled amid fallen revenues and uncertainty about the future.

Marysville drivers wait overnight for Chick-fil-A opening

The popular chicken restaurant began serving at 6:30 a.m. Thursday. Police plan to guide traffic for days.

‘Hundreds of millions’ in bogus jobless benefits paid out

Washington state has been reported as the top target of a Nigerian fraud ring.

Tulalip Resort Casino and Quil Ceda Creek to open Tuesday

Guests must wear a mask and occupancy is limited, the Tulalip Tribes announced Wednesday.

As Arlington gym closes, a Snohomish barber continues to cut

PA Fitness closed after the state attorney general filed a lawsuit. “We would lose,” a co-owner conceded.

FAA says it will let Boeing employees vouch for plane safety

The agency defended the current system but identified areas for improvement. Some lawmakers disagree.

Fraudsters using local identities for phony jobless claims

The Everett School District, for example, saw about 310 false claims using employees’ personal information.

State sues an Arlington gym for violating stay-home order

“It is my constitutional right to be open,” says a co-owner of PA Fitness. He plans to countersue.

Heavy traffic expected when Chick-fil-A opens in Marysville

The city warns there will likely be delays for days along 88th Street NE. near the new restaurant.

Somers announces $14 million in relief for small businesses

One program will target aerospace companies. The other will focus on service and retail industries.

Paine Field terminal to close for 71 days of ramp repairs

Alaska is down to one departure per day due to the coronavirus outbreak’s effect on travel.

Quarantini time! New state rule allows cocktails to-go

Enjoy a margarita or a Manhattan with lunch or dinner to go. At Buck’s in Everett, you keep the mason jar.