Let the real economists run the Fed

The Washington Post

“Trump can’t seem to restrain himself” from attacking the Federal Reserve and its chairman, said Robert Samuelson. This chairman, Jerome Powell, is the very one whom Trump himself nominated. He even calls him by his nickname. “I’m not even a little bit happy with my selection of Jay,” the president told The Washington Post. Trump’s problem is that the Fed has been raising short-term interest rates and “is reportedly considering another rate increase this month.” The goal is to preempt higher inflation and an ensuing crash. The downside is that higher interest rates tend to lower share prices, as investors move from stocks to bonds. Trump “is not the

first president to try to control the Fed and corrupt its independence.” But his innovation is that instead of twisting arms behind closed doors, which is bad enough, he has decided to “take his complaints public; the apparent aim is to intimidate the Fed to do his bidding.” Trump seems to be ready to propose legislation curbing the Fed’s powers. He is playing with fire. The consequences for the financial markets and the economy are not likely to be good ones. The Fed is called upon to make complex decisions to keep the economy afloat. “Who do we want making these technically demanding and politically crucial decisions?” Professional economists or the White House?