Fed Independence: What Are the Limits?
Bloomberg Opinion columnists debate the role of the central bank in the age of Donald Trump.
Former Fed official Bill Dudley’s provocative commentary elicits strong responses.
Photographer: Chip Somodevilla/Getty Images
Bill Dudley, who served as president of the Federal Reserve Bank of New York from 2009 to 2018, wrote in Bloomberg Opinion on Tuesday that President Donald Trump’s trade war with China is undermining the confidence of businesses and consumers, and worsening the economic outlook. While the central bank has suggested further rate cuts to help limit any damage, Dudley suggests the Fed should “seriously consider” not mitigating “this manufactured disaster-in-the making” by providing offsetting stimulus. Instead, officials could “state explicitly that the central bank won’t bail out an administration that keeps making bad choices on trade policy.”
Dudley goes further, writing that a Trump re-election could present a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, Dudley says, then Fed officials should consider how their decisions will affect the political outcome in 2020.