Long may the Fed re­main free from in­flu­ence

San Antonio Express-News (Sunday) - - Business -

When it comes to Fed­eral Re­serve pol­icy, we need to fo­cus our wor­ries about the cor­rect thing. Hint: It’s not in­fla­tion. It’s not re­ces­sion. Nor is it the tim­ing of in­ter­est rate hikes.

It’s the Fed’s in­de­pen­dence. Even Pres­i­dent Don­ald Trump agrees with me. Al­though, ad­mit­tedly, for rea­sons di­a­met­ri­cally op­posed to my rea­sons.

In re­cent weeks, Trump has ramped up his at­tacks on the Fed­eral Re­serve. Trump told

Fox News that “my big­gest threat is the Fed.” Also, that the Fed is “loco,” and he’s un­happy “be­cause the Fed is rais­ing rates too fast, and it’s too in­de­pen­dent.”

Af­ter three in­ter­est rate hikes in 2018, the Fed­eral Re­serve will raise short-term in­ter­est rates one more time this year, and likely an­other 1 per­cent over the next two years, ac­cord­ing to its fu­ture guid­ance — bar­ring un­ex­pected de­vel­op­ments, such as war or re­ces­sion.

The fact that Trump is un­happy is not par­tic­u­larly sur­pris­ing. In fact, White House grum­bling about the Fed has been com­mon enough over the past 80 years. Not us­ing

Trump’s uniquely col­or­ful lan­guage, mind you, but it’s still not wholly new.

Po­lit­i­cal lead­ers al­ways want pro-growth poli­cies. Low un­em­ploy­ment and high as­set prices tend to make lead­ers look good. Pres­i­dents gen­er­ally don’t want the Fed­eral Re­serve to “take away the punch bowl just as the party is get­ting started,” as Wil­liam McCh­es­ney Martin, who was Fed chair­man from 1951 to 1970, put it.

Pres­i­dent Richard Nixon re­port­edly blamed his 1960 loss to John F. Kennedy on Martin’s tight mon­e­tary pol­icy of high in­ter­est rates.

Pres­i­dent Lyn­don B. John­son com­plained as well, say­ing, “Martin, my boys are dy­ing in Viet­nam, and you won’t print

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