Our leaders have the right to question the Fed

The Fed keeps calling for raising rates in a return to “normalcy.” I would argue, with all of the central bank intervention here and abroad, that there has been no “normalcy” for almost a decade. There is no good reason, in my view, to raise rates based upon some academic theory of “normalcy.”

It is certainly the case, as exemplified by the Tax Cuts and Jobs Bill, that the president and the Congress are trying to grow the economy. By almost any measure that can be utilized, they are succeeding. At the same time, raising interest rates has the exact opposite effect. Rising rates means companies, people and mortgage holders have to pay higher interest rates, which slows down the economy. Consequently, in my view, the Fed, Congress and our president are now in opposition.

The Fed, while an independent institution, is also America’s central bank and the president — and any president of either party — has the right, if not the obligation, to question what it is doing as a matter of policy. I would also make the same comment for any member of Congress (of either party). Remember, the Fed was created by an act of Congress in 1913, the Federal Reserve Act. It is an independent institution by design, but it is also part of the government of the United States.

The notion of independence is not without meaning. The Fed has been given the ability by Congress to decide the monetary policies for the country. No one can tell it what to do. However, having said that, it does not mean, in my opinion, that a president, or a person in Congress, cannot have an opinion, and state it publicly, when they differ with the actions that the Fed may impose upon the country.

Mark J. Grant, chief global strategist at B. Riley FBR.