Trump Defends Fed Independence From Federal Reserve

President Donald Trump condemned the Federal Reserve on Thursday for politicizing interest rates by setting them without first determining which number would make him happiest. The central bank unanimously raised its benchmark rate by a quarter-point Wednesday, citing inflation, employment data and the obsolete theory that monetary policy should involve the economy. Trump demanded rates of 1 percent or lower while exempting Fed Chair Kevin Warsh, his own selection, from blame for the institution Warsh leads.

“They’re making interest rates political by using inflation numbers, economic data and unanimous votes instead of the completely nonpolitical method of doing exactly what I say,” Trump said. “Everybody knows an independent Federal Reserve means the president independently tells it what to do, and then it does that independently, preferably before lunch.” White House officials praised Trump for protecting the central bank from improper influence by central bankers, economists and arithmetic. They said presidential instructions would eliminate the partisan distortions produced by measuring prices, wages and economic growth before deciding what borrowing should cost.

Under the administration’s preferred system, rates would be calculated from Trump’s current mood, the previous hour of cable television and whether anyone in the room had recently described the economy as the greatest in history. Policy could then respond instantly to the nation’s most closely watched leading indicator: whether the president feels adequately appreciated. Trump said he retained confidence in Warsh, confirming that the chair would remain fully independent for as long as he independently reached the president’s preferred conclusions. Jerome Powell, Warsh’s predecessor, had already conducted years of field research showing how quickly Trump’s “total confidence” becomes “incompetent disaster” after one unwanted rate decision. The Federal Reserve is now independent because the president alone decides what it must do.

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