Donald Trump warned Monday night that the Janet Yellen-led Federal Reserve has inflated a financial bubble for political reasons, and said that bubble is putting the U.S. economy at risk.
“We have a Fed that’s doing political things by keeping interest rates at this level,” Trump said, referring to the Fed maintaining a low short-term interest rate target.
“We’re in a big, fat, ugly bubble,” he argued.
“The day Obama…leaves, and goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you’re going to see some very bad things happen, because the Fed is not doing their job,” he said. “The Fed is being more political than Secretary Clinton.”
Trump has attacked the Fed and Yellen, an Obama appointee, throughout his campaign, but this was the first time he did so in front of such a large national audience. His claims went unrebutted by Hillary Clinton.
The Federal Reserve has justified low short-term interest rates on the grounds that inflation is low, presenting an opportunity for monetary easing to extend recent labor market gains. Yellen and other central bank officials have suggested that the low interest rates are what the market demands, in large part because of massive demand for safe debt from abroad and because of investor uncertainty about the future.
Yellen and other Fed members have expressed confidence that they will be able to keep down inflation, should it pick up after four years of running below target. And while Yellen said in a press conference last week that she was concerned about the possibility of low rates leading investors to take too many risks, she said that “the threats to financial stability I would characterize, at this point, as moderate.”
