Trump Is Rude But Right About the Fed
In allowing money to tighten, the central bank may turn the microeconomic damage of a trade conflict into a recession.
You’re not fired. Yet.
Photographer: Drew Angerer/Getty Images
It was, of course, grossly unjust for President Donald Trump to cast Federal Reserve chairman Jay Powell as an “enemy” of Americans. There is no reason to doubt that Powell and his colleagues are trying to conduct monetary policy in the nation’s best interest. As much as Powell deserves sympathy over that attack, though, the disconcerting truth is that on several of the issues that divide the two men, Trump has been right and Powell wrong.
In December, the Federal Reserve raised its target for the federal-funds rate and suggested that further rate increases were ahead. Trump raged against the decision, reportedly considering trying to fire Powell. Especially in retrospect, the Fed seems to have erred. The stock market fell on the Fed’s announcement. Inflation expectations, which had just hit the Fed’s supposed target of 2% for the first time in a decade, again sank below it. Expectations of future interest rates dropped, too.