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Trump Declares War On The Fed

Date: Tuesday, July 31, 2018 7:35 PM EDT

The president acknowledged that he shouldn’t be running interference on the Fed’s perceived independence--but he doesn’t care at all about the perception. He recently explained:

“Now I’m just saying the same thing that I would have said as a private citizen…So somebody would say, ‘oh, maybe you shouldn’t say that as president.' I couldn’t care less what they say, because my views haven’t changed. I don’t like all of this work that we’re putting into the economy, and then I see rates going up.”

But, private citizen Trump had a completely different opinion on the Fed’s monetary policies. In fact, Trump had publicly criticized the Fed for years, lambasting its decision to keep interest rates low and prop-up the economy in the years following the Great Recession.

In 2011 Trump tweeted: “The Fed’s reckless monetary policies will cause problems in the years to come,” “The Fed has to be reined in, or we will soon be Greece,” In 2012 he noted: “The Audacity of @BarackObama – the Federal Reserve purchased 61% of all debt issued by Treasury in 2011. Killing our children’s future.”

Going further he once suggested to CNBC that Yellen should be “ashamed”…“She is obviously doing political, and she’s doing what Obama wants her to do.” His hypocrisy on this matter is stark.

In my March commentary I opined…”look for an epoch battle between our independent central bank and the Executive Office. We have a President who both viscerally understands the power of low rates and doesn’t follow implied government protocol…As the equity market continues this volatile cycle and interest rates rise unabated, expect Donald Trump to start a tweeting campaign demanding the return of QE and calling for the Fed to put a cap on interest rates.”

Trump would love to have an obsequious Fed Chair. However, right now Powell is firmly on the path for another two hikes this year. And because of the President’s very public call-out, he is going to want to continue the ostensible appearance of Central Bank independence for as long as possible. That is…at least until the stock market falls apart.   

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