Donald Trump Is Pissed Off at the Fed Chair for Basically Coherent Reasons

WASHINGTON, DC - JULY 17:  Federal Reserve Board Chairman Jerome Powell testifies during a hearing before the Senate Banking, Housing and Urban Affairs Committee July 17, 2018 on Capitol Hill in Washington, DC. The committee held a hearing on 'The Semiannual Monetary Policy Report to Congress.'  (Photo by Alex Wong/Getty Images)
Federal Reserve Board Chairman Jerome Powell, who Donald Trump is not pleased with. Alex Wong/Getty Images

Donald Trump added to the list of rules he’s broken about how presidents are supposed to discuss the economy Thursday, criticizing the Federal Reserve’s recent decisions to raise interest rates during an interview with CNBC. “I am not happy about it,” Trump told anchor Joe Kernan. “I don’t like all this work we’re putting into the economy, and then I see rates going up.”

Presidents generally refrain from criticizing the Fed, both out of deference to the central bank’s historical independence and to avoid messing with the financial markets. But of course, this is Donald Trump we’re talking about, he who opens his mouth about all sorts of topics that were previously seen as off limits. He’s complained about the value of the dollar, for instance, and tweeted about the jobs report before it was released, both of which were long considered no-nos because they could influence trading. Trump, being Trump, is unconcerned with such norms. “I’m just saying the same thing I would have said as a private citizen,” Trump explained after carping yet again about the rising value of the dollar in today’s interview. “Maybe someone would say you shouldn’t say that as a president. I couldn’t care less.”

In other words, “I Really Don’t Care, Do U?

Some experts, unsurprisingly, expressed alarm, suggesting that it might seem as if Trump was trying to bully the Fed into changing course on policy. “This is such a risky thing for the Fed, and for the president, and for central bank independence,” Peter Conti-Brown, a Fed historian at the University of Pennsylvania’s Wharton School, told Bloomberg.

That might be a bit overwrought. As the White House noted in its cleanup statement, Trump both referred to Powell as a “good man” and specifically said that while he was “not thrilled” with central bank’s choices, he wasn’t actively interfering with them. “I’m letting them do what they feel is best,” he said. It’s not as if Trump’s comments are totally unprecedented, either. Ronald Reagan openly criticized the Fed and even mused about moving it into the Treasury Department. By comparison, Trump’s carping Thursday was pretty mild.

The most surprising thing about the comments, in fact, may have been that they were basically coherent. Trump believes that by raising borrowing costs, the Fed is frustrating his efforts to juice the economy and wage a trade war using tariffs. Here’s the bit in full:

I put a very good man in the Fed. I don’t necessarily agree with it because he’s raising interest rates. I’m not saying I agree with it. I must tell you, I don’t. I’m not thrilled, because we go up and every time you go up they want to raise rates again. And 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.

But I don’t like all of this work that goes into doing what we’re doing. You look at the euro. You look at what’s going on with the EU. They’re not doing what we’re doing. And we already have somewhat of a disadvantage. Although I’m turning that into an advantage. You know for last year, and for years, we’ve been losing $150 billion with the EU nations, with the European Union. And they’re making money easy. And their currency is falling. And China. Their currency is dropping like a rock. And our currency is going up. And I have to tell you, it puts us at a disadvantage. Now, I’m just saying the same thing I that would have said as a private citizen. So maybe someone would say you shouldn’t say that as a president. I couldn’t care less what they say. Because my views haven’t changed. I don’t like all this work we’re putting into the economy, and then I see rates going up. 

This is all fairly sound analysis. Higher interest rates should slow the economy a bit, dampening the short-term effect of the administration’s tax cuts. Trump would much prefer it if the Fed just let growth rip for a while (and to be honest, I kind of agree with him). The Fed’s moves have also likely helped push up the dollar in recent months (higher interest rates lead investors to invest more in U.S. debt, increasing demand for greenbacks), which is generally bad for our trade deficit, and at the moment is undercutting the impact of Trump’s tariffs a bit by making imports relatively cheaper (many would see that as a good thing).

Now, it’s possible Trump should have expected all of this. Many predicted that Republican tax cuts would result in higher interest rates specifically because they would give the economy a quick boost, causing the Fed to hike. His complaints are also pretty transparently hypocritical now, given that in 2016, when the economy was in worse shape, he accused former Fed Chair Janet Yellen of keeping interest rates lower than they should have been in order to help the Democrats.

But by Donald Trump’s standards, today’s outburst was relatively harmless, and relatively on-point.