National Post (National Edition)
KuDLOw urGEs FED tO HIKE rAtEs ‘vEry sLOwLy’
man,” said Kudlow, who has recently recovered from a mild heart attack. “My hope is they understand that and they will move very slowly.”
A Fed spokesman declined to comment.
Most developed-world central banks are given a degree of independence from governments so monetary policy doesn’t succumb to the whims of politicians. In emerging markets such as Turkey, the government has felt no such restraint.
Powell, speaking in Portugal on June 20, said the case for continued gradual interest-rate increases remains strong. The Fed raised rates on June 13 for the second time in 2018 and signalled two more moves this year. It is continuing to slowly tighten monetary policy to keep inflation in check amid unemployment that has declined to the lowest level since 2000.
White Houses in recent decades have tried to avoid public comment on the Fed, but Kudlow hasn’t held back. In March, after Trump picked him to replace Gary Cohn, he said he hoped the Fed didn’t “overdo it” on policy as he argued officials should just let the economy “rip.”
Kevin Hassett, chairman of the White House’s Council of Economic Advisers, later told MSNBC television he respects “the independence of the Fed” and would not give it interest-rate advice.
The Fed is answerable to Congress, with the chair obliged to testify twice a year and deliver a report on monetary policy, but has been granted independence to pursue its dual mandate for maximum employment and stable prices.
While the economy is improving, Fed officials want to ensure the nearly decadelong expansion doesn’t overheat and turn into a recession. On Thursday, Atlanta Fed President Raphael Bostic told community groups that “we can’t be cavalier and say let’s grow as fast as we can.”
One of the problems the central bank faces is figuring out how much risk is posed to inflation by a powerful dose of fiscal stimulus signed by Trump that’s cut taxes by US$1.5 trillion and lifted federal spending by US$300 billion.
“Our program is, we’re expanding the economy’s potential to grow,” said Kudlow, repeating the White House’s line that the tax cuts will deliver lasting supplyside benefits to the economy. “That’s the new approach.”