Fly On Wall Street

Trump says he’s ‘not happy’ with Fed raising interest rates

President Donald Trump on Thursday said he’s not happy with the raising of interest rates by the Federal Reserve and suggested the central bank is working at cross purposes with his administration’s economic program.

In an interview published on CNBC, Trump said he wasn’t thrilled with the Fed’s rate hikes — despite calling Jerome Powell, whom he picked to replace Janet Yellen, a “good man” — and said he didn’t care that he was breaking a precedent under which presidents do not comment on the Fed so as to safeguard its independence.

“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,” Trump said.

Second-quarter GDP is estimated to run at an annual rate north of 4%.

“Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.” He added, “But I don’t like all of this work that goes into doing what we’re doing.”

“I don’t like all of this work that we’re putting into this economy and then I see rates going up,” Trump said.

The Fed has raised rates twice this year and is forecasting two more increases in 2018. Powell told Congress this week that more rate hikes would be appropriate “for now,” suggesting the central bank might pause its campaign in 2019.

The unprecedented stimulus of tax cuts and additional government spending at this stage of the economic cycle has raised questions about how hot the U.S. economy can run.

Last month, Trump economic adviser Larry Kudlow fired the first shot at the Fed, saying he hoped it moved slowly to raise rates.

Powell has said he’s not concerned about political pressure from the administration. In an interview with the public-radio program “Marketplace,” Powell said “the Fed has a long tradition of conducting policy independent of all political concerns.”

Economists said Wall Street may begin to worry the Fed would not be as aggressive to keep inflation under control because of White House pressure.

U.S. stocks DJIA, -0.53% , already weaker on the day, didn’t react much to the interview, though the dollar DXY, +0.07% weakened.

Trump has had the unique ability to appoint six of seven members to the Fed board of governors. So far he has put forward five nominees. None were seen by Wall Street as Trump loyalists who would rock the boat at the central bank. Two of his picks, Powell and Randal Quarles, the vice chairman of supervision, are already on the Fed board.

Three more nominees — Richard Clarida, an economist who advised Pimco; Michelle Bowman, a Kansas City bank regulator; and Marvin Goodfriend, an economics professor at Carnegie Mellon University — are waiting for final Senate votes.

The Fed has raised target interest rates via five quarter-point moves since Trump was sworn into office, to a range of 1.75% to 2%, slowly moving away from a policy of supporting the economy with a more neutral stance.

There is a debate among Fed officials as to whether the Fed will have to eventually raise rates to a level that slows growth.

Diane Swonk, chief economist at Grant Thornton, said every administration gets upset when interest rates “go from benign to biting.”

“A lot of times [the displeasure] is more subtle,” Swonk said.

Peter Hooper, chief economist at Deutsche Bank Securities, said White House pressure played a role in the great inflation of the 1970s.

Both Lyndon Johnson and Richard Nixon put pressure on the Fed to hold interest rates low to avoid an economic slowdown “and what ensued was an overheated economy and inflation pushing above 10%, which resulted in soaring interest rates and a deep recession,” Hooper said.

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