Critics appalled that President Donald Trump publicly expressed unhappiness about the possibility of more Federal Reserve interest rate hikes are being naive if they think Fed policies have not traditionally been subject to political pressure. In this case as in others, Trump is openly engaging in behavior that a more seasoned politician might keep private.
Trump's dissatisfaction with Fed Chairman Jerome Powell flies in the face of what was expected when Trump appointed him: a continuation of the Janet Yellen status quo, which included a slow glide of rate hikes. As a candidate and a businessman, Trump echoed Fed critics who viewed the decade-long reign of super-low interest rates as dangerous and bubble-building.
Trump insisted this week that "my views haven't changed," although they are different now than they were before the economy's paper performance was his problem. He added that he intends to let the Fed's governors "do what they feel is best" even if he fears it may slow down the economic growth he craves, making his administration's deficit-exploding policies even more dangerous and raising fears of a sovereign debt crisis.
As Market Watch reports, the Federal Reserve of the near future will be nearly entirely Trump's:
Trump has had the unique ability to appoint six of seven members to the Fed board of governors. So far he has put forward five nominees. None were seen by Wall Street as Trump loyalists who would rock the boat at the central bank. Two of his picks, Powell and Randal Quarles, the vice chairman of supervision, are already on the Fed board.
Three more nominees—Richard Clarida, an economist who advised Pimco; Michelle Bowman, a Kansas City bank regulator; and Marvin Goodfriend, an economics professor at Carnegie Mellon University—are waiting for final Senate votes.
Since the financial crisis of 2008, as Jeffrey Rogers Hummel pointed out in a 2014 Reason article, the Federal Reserve has morphed dangerously "from a central bank confined primarily to managing the money supply into an institution that is now a giant government intermediary borrowing massive sums in order to allocate credit." In 2009 I wrote about the early days of the movement, fueled by Ron Paul's presidential campaign, opposing the Fed's policy of keeping interest rates very low—a policy that Trump now defends—as a danger to the economy. Sen. Rand Paul (R-Ky.) believes Trump would sign an "audit the Fed" bill, a longtime Paul family desire, even though Trump doesn't talk about the idea as president and his appointee Powell is against it.