Trump steps up attacks on Federal Reserve’s rate hikes
President Donald Trump on Thursday escalated his attack on the Federal Reserve’s interest rate increases, asserting that “the Fed is out of control” and blaming it for this week’s plunge in stock prices.
“It’s a correction that I think is caused by the Federal Reserve with interest rates,” Trump said when asked by reporters in the Oval Office about the stock market swoon.
He added, “We have interest rates going up at a clip that’s much faster than certainly a lot of people, including myself, would have anticipated. I think the Fed is out of control.”
It was the latest in series of recent barrages the president has unleashed at the Fed, which under his hand-picked chairman, Jerome Powell, has been gradually raising rates as the economy has strengthened to prevent a run-up in inflation. Critics have expressed worry that the president’s attacks threaten the Fed’s ability to operate free of political pressure.
Though Trump said he objected to the Fed’s continual rate hikes, he said in response to a question that he would not seek to oust the chairman.
“No, I’m not going to fire him,” Trump said. “I’m just disappointed at the clip” that rates are being raised.
Trump’s blunt public criticism of the Fed, which began this summer, is without precedent. His predecessors have taken care not to directly attack the central bank’s rate policy out of concern that such criticism could backfire. Investors might, for example, question whether the Fed would feel free to keep raising rates, if it felt it necessary to control inflation.
Conversely, some worry that the central bank might even raise rates faster than it otherwise would, to demonstrate the independence of its inflation-fighting policy.
From its beginning, the Fed was designed to insulate it from political pressures. A full term on the seven-member Fed board lasts 14 years — a lengthy period that was seen as liberating Fed officials from any fear that their rate decisions might cost their jobs.