President Donald Trump on Thursday fired a new broadside against the Federal Reserve under Chairman Jerome Powell, blaming the central bank for the economy’s failure to exceed 4 percent economic growth last year.
Trump’s attack signals that he has no plans to let up on the Fed despite its announcement Wednesday that it doesn’t expect to raise rates this year, given muted inflation and slowing global growth. The central bank also said that later this year it will stop shrinking its multitrillion-dollar bond holdings, a process dubbed “quantitative tightening” that can make it harder for borrowers to obtain credit.
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“The world is slowing, but we’re not slowing, and frankly if we didn’t have somebody that would raise interest rates and do quantitative tightening, we would’ve been at over 4 [percent] instead of at 3.1 [percent],” Trump told Fox Business in an interview that will air in full Friday morning.
The economy expanded more quickly last year thanks to tax cuts and increased government spending, but it has not grown at a 4 percent annual rate since 2000.
Fed officials project that the economy will grow by 2.1 percent this year, indicating that some of the boost from the 2018 fiscal stimulus might start to wear off — feeding the central bank’s decision to hold off on further rate increases.
The president said he didn’t know if his repeated criticism of the Fed had played a role in its decision to pause the rate hike campaign.
“I hope I didn’t influence, frankly, but it doesn’t matter,” he said. “I don’t care if I influenced or not. One thing: I was right.”
Powell has repeatedly insisted that Trump’s criticism has played no role in the central bank’s policymaking decisions, highlighting the importance of the Fed’s independence from short-term political considerations.
Ultimately, the Fed and Trump have fundamentally different views of the economy. While the administration’s goal is to achieve sustained 3 percent growth, the central bank doesn’t think the economy is productive enough to sustain that pace without stoking inflation.
So if growth approaches the administration’s target — as it did last year — the Fed is likely to cautiously raise rates.