Not for the first time, the Federal Reserve turned a deaf ear Wednesday to President Trump’s advice on managing the U.S. economy: It left short-term interest rates alone.
“We don’t feel like the data is pushing us in either direction,” Fed Chairman Jerome Powell told reporters after the central bank’s monetary policy committee concluded its two-day meeting. “We don’t think about short-term political considerations, we don’t discuss them, we don’t consider them in making our decisions one way or another.”
Powell, whom Trump selected as Janet Yellen’s successor last year, is no stranger to pressure from the White House. The president reportedly asked aides whether he could fire the Fed chief last year after the central bank raised rates four times, taking them to a range of 2.25 to 2.5%. Trump, who had praised Yellen as a “low-interest-rate person,” feared the hikes were undercutting the economic growth he had promised to voters.
And learning that laws designed to ensure the Fed’s independence allow him to fire the chairman only for cause hasn’t stopped Trump from venting his frustrations since.
“Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening,” Trump complained via Twitter on Tuesday. “We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing.”
[Related: Trump told Fed Chairman Jerome Powell: ‘I guess I’m stuck with you’]
Quantitative easing, the practice of buying government securities to make credit markets more liquid, was begun by the Fed after slashing interest rates to nearly zero during the financial crisis failed to buoy the economy sufficiently. Its balance sheet quadrupled to $4.5 trillion in the process, and the bank decided to begin paring it in late 2017 by slowing reinvestment of proceeds from maturing securities.
Wall Street predicted at the time the central bank could shrink its balance sheet by no more than $1 trillion to $1.5 trillion, and Powell reaffirmed Wednesday that the rollback, which Trump called quantitative tightening, would end in September.
….up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!
— Donald J. Trump (@realDonaldTrump) April 30, 2019
While Trump may be breaking with tradition by publicly advising the Fed, his frustration doesn’t surprise the head of JPMorgan Chase. “I’ve never seen a president who wanted interest rates to go up,” Jamie Dimon, chief executive officer of the largest U.S. lender, told reporters in October.
Indeed, American presidents typically win office based in part on promises to deliver or sustain growth, and the central bank sometimes has to curb that through higher interest rates to keep the economy from overheating. The tension between the two goals ensnared President Richard Nixon and then-Fed Chairman Arthur Burns as long ago as the early 1970s, when Nixon worried that high rates might impede growth during his reelection campaign.
