President criticizes rate increases

Fed’s independence threatened, some fear

WASHINGTON — President Donald Trump on Thursday cast aside concerns about the Federal Reserve’s independence, saying he was “not happy” with the Fed’s recent interest rate increases.

Trump told CNBC in an interview: “I don’t like all of this work that we’re putting into the economy and then I see rates going up.”

Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018. Its rate hikes are intended to prevent the economy from overheating and igniting high inflation. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth. In particular, the Fed’s most recent rate hikes could dilute some of the benefit of the tax cuts Trump signed into law last year.

The president acknowledged that his comments would likely raise concerns about threatening the independence of the Fed. The central bank has long been seen as needing to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.

The Fed’s dual mandate is to maximize employment and stabilize prices. By maintaining its independence, the central bank can make politically contentious decisions to deal with economic challenges, such as the huge bond purchases it made after the 2008 financial crisis to help drive down long-term rates to support the economy. Many Republican lawmakers criticized that action.

In February, Jerome Powell, Trump’s hand-picked choice, became Fed chairman. Last week, Powell said in an interview with the radio program Marketplace that he didn’t expect to face pressure from the White House.

“We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns,” Powell said.

He added, “No one in the administration has said anything to me that really gives me concern on this front.”

The reaction to Trump’s remarks in the financial markets was muted. The U.S. dollar fell modestly to 112.46 yen from 112.84 yen earlier, and yields on Treasurys dipped slightly.

After Trump’s interview with CNBC was made public, Lindsay Walters, a White House spokeswoman, said the president “respects the independence of the Fed.”

“The president’s views on interest rates are well-known, and his comments today are a reiteration of those long-held positions, and public comments,” Walters said.

Speaking about Fed policy in his interview with CNBC, Trump said he is “letting them do what they feel is best.”

But his comments raised alarms, including with some former Fed officials who saw in his remarks a possible effort to apply public pressure on the central bank.