The previous chairwoman of the Federal Reserve Janet Yellen was recently interviewed by the Marketplace and questioned President Trumps basic economic understanding and overall understanding of monetary policy. Trump recently made comments about the Fed having an "exchange rate objective" which, Yellen explains, shows his lack of understanding.
During his 2016 campaign President Trump said that Yellen should be ashamed of her work as the Fed chair, but now he criticizes Jerome Powell for raising interest rates and thinks that is to blame for market slow down at the end of 2018. Janet Yellen is very nervous that President Trump will undermine the importance of the Fed and cause confidence in the Fed to drop drastically which could be very bad.
It is very interesting that President Trump is criticizing the Fed considering he considers economic growth to be one of, if not the most important part of his job. You'd think they would work together to achieve that. I hope I do not see Trump continue to undermine the Fed as they are extremely important to the economy, especially as we approach what people think will be a slow down.
https://www.cnbc.com/2019/02/25/janet-yellen-says-trump-has-a-lack-of-understanding-of-fed-policies-and-the-economy.html
4 comments:
Interesting article, Antonio. I agree that they should be working together in order to achieve the same goal of economic growth within the United States. It seems a bit petty that they are continuing to just argue back in forth instead of trying to solve the issue of the economy slowing down. Yellen definitely has a justifiable reason to be concerned, if President Trump keeps trying to undermine the Fed, they will be very hesitant to make any sort of changes that may help the economy in the future.
Interesting article and subsequent commentary. I think it is important to note that while to objective of the fed is to grow the economy, it also is charged with its stabilization. This has also drawn the ire of President Trump. While the fed sees a growth of lets say 2% as a good rate, Mr. Trump has been ardent in the past that the economy is capable of more and that the Fed has thus been stifling potential growth. I'm not saying he is right, but I believe it is good knowledge to think back to when he begins to criticize the work of the Fed. Now that the Fed will be holding off rate increases it will be interesting to see how the President and Fed would react if the economy stalled deeply in the near future.
Antonio- thanks for sharing this article with us! I too am confused about the lack of cooperation between the federal reserve and the president - it seems like both should be looking out for the best economic outcome for the United States, but there seems to be a lack of understanding between the two. Trump has been specifically very harsh on federal reserve chairman, Powell, which I believe has had negative affects on the perception of the economy's health. Trump has made it his goal to really push the economy into a higher growth rate, but the Fed's more hawkish perception of an overheating economy have really come to be a clear disagreement and resulted in a slew of rhetoric from both sides. Since the Fed has decided to slow/stop the rate hikes (aka putting the breaks on the economy), I wonder how Trump will respond to this since it seems to be in his favor.
This article is very interesting, in the way that Trump accuses Yellen of raising the interest rates, which he sees as hurting the US economy. As a real estate developer (and large borrower), Trump always advocated for rates to be reduced. However, without this raise in interest rates the prices might become unstable (a growing economy might lead to inflation, although it hasn’t yet in this cycle) and lead to high unemployment. Especially with the trade war that is going on, import prices don’t need to be any higher and retaliatory tariffs would reduce exports having a great effect on the economy. Trump criticizing how the Fed operates would lead the US to have lower confidence in the Fed.
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