Markets

Jerome Powell privately promises Fed’s independence amid Trump’s public attacks

Jerome Powell privately promises Fed’s independence amid Trump’s public attacks

Trump, who spooked investors in July when he criticized the US central bank's monetary policy tightening, told Reuters in an interview that he believed the Fed should be more accommodating.

In currencies, the dollar came under pressure after Trump reiterated his displeasure at the Fed's rate hikes, saying the central bank should do more to help him boost the USA economy.

Only once short-term rates reach a "neutral" level where they are neither stimulating nor braking the economy should the central bank potentially stop raising rates and figure out what to do next, Dallas Fed President Robert Kaplan said in an essay.

"I asked him specifically about the independence of the Fed, and he reinforced the fact that their goal is to [address] unemployment, our economy, and that is their only objective", Scott (R-S.C.) said in an interview.

The Fed has raised rates twice this year and is expected to do so again next month. While economic theory (in the simplest terms) says that rate hikes slow the pace of economic growth, interest rates today remain historically low, and measures of credit growth show that access to loans is still generally easy.

Kohn said he didn't think Powell or the Fed would change their course because of Trump's remarks.




Trump was attending a private fundraiser with GOP donors at the Southampton, New York, home of Howard Lorber, the chairman of the iconic hot-dog company Nathan's Famous. There were about 60 guests at the event, including Jared Kushner, John Catsimatidis and his son, Chicago Cubs co-owner Todd Ricketts and Treasury Secretary Steven Mnuchin.

Scott's account is significant because Powell is under increasing White House pressure to back down from his goal to slowly raise interest rates.

Recent presidents have largely avoided criticising the Fed, trying to preserve the bank's independence and its credibility with financial markets, foreign governments and the public. Presidents have not commented on Federal Reserve policy in over twenty years after Bill Clinton chose to stay mum on the central bank's choices.

The central bank is created to be independent from political interference. "As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions".

President Donald Trump is, famously, not a big believer in institutional or even constitutional constraints on his power and his prerogatives. Typically, the greatest influence a president has over the Fed is the appointment of governors.

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