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Donald Trump commented on the Fed after Wednesday’s rate cut.
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As president and candidate, Trump continues to undermine the Fed’s independence.
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Trump has even changed his mind about Fed Chairman Jerome Powell, whom he himself appointed.
The rate cuts are finally here and former President Donald Trump is not happy about it.
On Wednesday, the Federal Open Market Committee announced a 50 basis point interest rate cut, the first cut Americans have received in more than four years. With inflation slowing and the labor market cooling in recent months, some experts and Democratic lawmakers have called on Fed Chairman Jerome Powell to cut rates as soon as possible to provide Americans with relief from high prices.
But Trump sees it differently. At a campaign rally in New York on Wednesday, he said the rate cut “shows that the economy is in very bad shape when you cut rates that drastically, assuming they’re not just playing politics.”
“The economy would be very bad, or they’re playing politics, one or the other,” Trump said. “But it was a big cut.”
He has argued in the past that the Fed would only cut rates just before the election to support Democrats, and he reiterated this in the run-up to the central bank’s announcement.
“Tomorrow they’re going to cut rates and take care of all the political stuff,” Trump said at a rally in Michigan on Tuesday, adding that if he wins the presidential election, “we’re going to cut rates.”
It is notable that the president has no influence on lowering interest rates. The Federal Reserve is politically independent and is supposed to make monetary policy decisions solely on the basis of its dual mandate to keep inflation low and employment high.
That’s something Trump wants to change — The Wall Street Journal reported in April that members of Trump’s team were making plans to restructure the Fed and give Trump a say in rate decisions. He later walked back those comments, saying in an August interview with Bloomberg that he doesn’t “have to make the decisions, but it does mean I have to have the right to talk about them like everybody else.”
Senior Trump advisers told the Journal that the plans were not yet final.
Trump has previously accused the Fed of political policy. In February, he said during an interview with Fox that Powell “is going to do something to help the Democrats, I think, when he cuts rates.”
While Powell did not directly respond to Trump’s comments, the Fed chairman has repeatedly said that the Federal Reserve is an independent entity that makes decisions based on data and is not influenced by politics. “Our job is to support the economy on behalf of the American people, and if we do it right, it will significantly benefit the American people,” Powell said during Wednesday’s press briefing. “It’s something we all take very, very seriously. We don’t put any other filters on it. I think once you start doing that, I don’t know where you stop.”
Trump attempted to use his presidential power to appoint members to the Fed’s board of governors who supported his unorthodox vision for the central bank. Judy Shelton, a conservative economist who Trump nominated to the board of governors in 2019, had previously written that the Fed was “almost a rogue state” that could not be trusted. Even fellow Republicans opposed her nomination, resulting in a 47-50 floor vote that was botched, exacerbated by the GOP’s absence due to COVID-19.
“In her previous statements, Ms. Shelton has called for the Federal Reserve to be less independent from the political branches and has even questioned the need for a central bank,” Sen. Susan Collins, a Republican from Maine, said of her at the time. “This is not the right message to send, especially in the midst of a pandemic.”
Shelton was one of a number of Trump loyalists whose nominations fell through. Former 2012 GOP presidential candidate Herman Cain and conservative commentator Stephen Moore both withdrew their nominations amid opposition. Trump secured confirmations to the Fed Board from former Kansas Bank Commissioner Michelle Bowman and economist Christopher Waller.
Trump has reversed his position on his key Fed appointment: Powell.
“He’s strong, he’s dedicated and he’s smart,” Trump said of Powell when he nominated him to lead the Fed in 2017.
In February, the former president said he would not renominate Powell to lead the Fed. Earlier this summer, Trump told Bloomberg News he would let Powell finish out his term. Trump’s tepid support for Powell underscores how fickle he can be when it comes to the central bank.
“Believe me, there are few more important offices in our government than this,” Trump said in 2017, as Powell looked on.
On that point, Trump has not deviated from his position.
Read the original article on Business Insider
