Donald Trump downplayed his earlier assertion that the president should have a “say” in setting interest rates, a comment that sparked a debate between both presidential campaigns over the independence of the Federal Reserve.
“I think it’s fine for the president to talk,” the Republican presidential nominee said in an interview with Bloomberg on Monday, “but that doesn’t mean the president has to listen.”
“Obviously the president can talk about interest rates because I think I have very good instincts. That doesn’t mean I’m in charge, but it does mean I should have the right to talk about interest rates just like anybody else.”
The new comments come less than two weeks after President Trump, responding to a question about the U.S. central bank’s interest rate policy and prospects for a soft landing for the economy, said he wanted to have a “say” on interest rates if re-elected.
Then-US President Donald Trump (right) introduces Jay Powell (left), whom he nominated to be Federal Reserve Chairman in 2017. (Drew Ungerer/Getty Images) (Drew Ungerer via Getty Images)
“I think the president should at least have a say. Yes, I strongly believe that,” he said at a news conference at his Mar-a-Lago resort on August 8.
Those comments raised speculation among some Fed watchers that the Republican candidate, if he wins the November election, could try to curtail the Fed’s independence.
He also made the Fed an election issue, with some economic experts warning that political interference in monetary policy is a bad idea.
Vice President Kamala Harris responded by saying, “The Fed is an independent organization, and as president, I would never interfere with the Fed’s decisions.”
Later, Trump’s running mate, J.D. Vance, told CNN that the former president had said “something really important and really significant” and that monetary policy “should fundamentally be a political decision.”
The Biden administration has often emphasized the Fed’s independence as a way to send a message to Wall Street that a Trump presidency could destabilize markets.
Some of Trump’s defenders, including former adviser Stephen Moore, have countered that “Washington and Wall Street are in a panic” and have suggested that a pricing rule should be used to set interest rates.
September Cut
As long as inflation continues to ease, the Fed is expected to cut interest rates at its next meeting on Sept. 17-18, and the political spotlight on the Fed and Chairman Jerome Powell will only increase.
Several Fed officials have said in recent days that September will likely mark a turning point for the Fed to cut interest rates for the first time in more than four years.
The story continues
Minneapolis Fed President Neel Kashkari, one of the central bank’s most hawkish members, told The Wall Street Journal on Monday that he is prepared to cut interest rates at the September policy meeting as the job market softens and the balance of risks shifts away from inflation.
Kashkari said he still expects the Fed to cut rates at a cautious pace for now, but that the pace could accelerate if the labor market weakens.
Federal Reserve Bank of Minneapolis President Neel Kashkari in 2019. (Evan Agostini/InVision/AP) (Evan Agostini/InVision/AP)
San Francisco Fed President Mary Daly and Atlanta Fed President Raphael Bostic also signaled they could give the go-ahead in September.
Bostic told the Financial Times he was “open” to cutting rates next month, warning that the Fed “cannot afford to delay” cutting rates amid a weakening job market, while Daly told the paper it was time to consider adjusting borrowing costs.
And St. Louis Fed President Alberto Mussallem said last week that “the time may be approaching” for the central bank to cut interest rates, saying the latest inflation readings gave him more confidence that inflation was on its way back to the Fed’s 2 percent target.
Markets are pretty much pricing in a Fed rate cut next month. The question is whether it will be a quarter or a half percentage point cut. The deciding factor will likely depend on the next jobs report, due on September 6th.
Powell is scheduled to speak at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming, this Friday, where he will have the opportunity to offer updates and guidance.
A rate cut in September would certainly draw criticism from President Trump and other Republicans in Congress for bowing to election-year pressure.
In an interview with Bloomberg published last month, Trump reiterated that central bankers should not ease monetary policy before the November election.
“They know they shouldn’t do that,” Trump said.
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