Former New York Fed President Bill Dudley on Tuesday called on the Federal Reserve to manipulate the economy to stymie President Trump’s reelection. Dudley made the plea in an op-ed published by Bloomberg News. Dudley argued that Trump’s effort to reset trade with China is hurting the economy and that the Fed should enact policies that hinder Trump and hurt his reelection chances.
President Trump has been fighting the Fed over rising interest rates and a too rapid pullback on quantitative easing that stifled the nascent economic boom stemming from Trump’s economic policies and tax cuts. The Fed has since cut interest rates but not enough for Trump who is calling for another one percent reduction and to consider some quantitative easing.
U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along?
…I understand and support Fed officials’ desire to remain apolitical. But Trump’s ongoing attacks on Powell and on the institution have made that untenable. Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.
There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents 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, then Fed officials should consider how their decisions will affect the political outcome in 2020.
Dudley’s bio accompanying the op-ed: “Bill Dudley is a senior research scholar at Princeton University’s Center for Economic Policy Studies. He served as president of the Federal Reserve Bank of New York from 2009 to 2018, and as vice chairman of the Federal Open Market Committee. He was previously chief U.S. economist at Goldman Sachs.”
Trump has not responded so far to Dudley. However, Trump did tweet about the Fed on Tuesday, saying, “The Federal Reserve loves watching our manufacturers struggle with their exports to the benefit of other parts of the world. Has anyone looked at what almost all other countries are doing to take advantage of the good old USA? Our Fed has been calling it wrong for too long!”
The Federal Reserve loves watching our manufacturers struggle with their exports to the benefit of other parts of the world. Has anyone looked at what almost all other countries are doing to take advantage of the good old USA? Our Fed has been calling it wrong for too long!
— Donald J. Trump (@realDonaldTrump) August 27, 2019