Not Losing Interest: Trump Hammers Fed Over Rates


Aside from Democrats and fake news, perhaps President Donald Trump's most consistent target for criticism has been the Federal Reserve. In recent months, the president has repeatedly lambasted the Fed and its chairman, Jerome Powell, over monetary policy that Trump feels has held back or even hurt the U.S. economy. Specifically, the president believes the Fed raised interest rates too often and too much in recent years, at a time when the overall U.S. economy surged in all sectors like unemployment, manufacturing, consumer spending, business startups, and wage growth.

President Trump accuses the Fed of throwing cold water on the economy with all of those rate hikes (nine between 2015 and this year), saying the hikes "came far too early and far too severely." When the Fed did finally cut rates this summer by a quarter-percent, Powell blunted any short-term positive impact by immediately saying this was not the start of any trend, and signaling no further rate cuts this year. That prompted the president to say Powell and the Fed "let us down" again, in failing to reverse the rate hikes fast enough.

The president's frequent attention to the Fed comes as no surprise to Texas economist Ray Perryman, especially with an election year just around the corner. "(Trump's) much more vocal about it, but every president always wants monetary policy to be looser around re-election time, it is human nature to expect that and whether they say it or not, everybody knows it," says Perryman. "Every president wants to run (for re-election) into a strong economy."

While he understands the president's thinking and frustration, Perryman also believes the Fed is right to proceed cautiously and not take any quick action in response to Trump's criticism. "If the Fed were to massively lower interest rates all of a sudden, that might well send shock waves through the markets and make the markets think there's more to worry about than there is, and end up having exactly the opposite effect," he says. "So I think a massive rate cut would not be in order right now, because for one thing I think it would spook the markets."


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