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Trump complains to donors about Fed chairman’s raising of interest rates

Federal Reserve chairman Jerome H. Powell (above), on the job for six months, already has drawn his boss’ ire: President Trump complained to wealthy donors last week that Powell disappointed him by raising interest rates.
Federal Reserve chairman Jerome H. Powell (above), on the job for six months, already has drawn his boss’ ire: President Trump complained to wealthy donors last week that Powell disappointed him by raising interest rates.(Jacquelyn Martin/Associated Press/File)

WASHINGTON — President Trump complained to wealthy donors at a fund-raiser in the Hamptons last week that the man he chose as chairman of the Federal Reserve, Jerome H. Powell, has disappointed him by raising interest rates, according to people who attended the event.

In the midst of a long riff on the economy, Trump said he had expected Powell to adhere to an easy-money monetary policy, by keeping interest rates low, when he nominated him in November to succeed Janet Yellen. Instead, Powell has continued Yellen’s pace of a gradual return to historically normal rates, by raising rates twice this year.

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Trump publicly criticized the Fed this summer, breaking with decades of presidential convention. “I don’t like all of this work that we’re putting into the economy and then I see rates going up,” Trump told CNBC in a televised interview in July. “I am not happy about it.”

The next day, Trump appeared to criticize the Fed again on Twitter.

“The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The US should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates — Really?” Trump wrote.

Aides have said Trump worries that additional rate increases could slow economic growth, which is on track to reach 3 percent this year for the first time since 2005. They have insisted that Trump was not trying to intervene in Fed policy. The Fed has historically operated independently from the executive branch. Trump also criticized Yellen as a presidential candidate in 2016, saying she should be “ashamed of herself” for keeping interest rates low.

Trump’s comments about Powell were first reported by Bloomberg. A Fed spokeswoman declined to comment Monday afternoon.

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Powell’s moves as Fed chairman have not surprised markets, nor struck Fed-watchers as unexpected. In a confirmation hearing last year, he told senators he expected the Fed to continue raising interest rates in the near term.

Fed officials, including Powell, have long said they are gradually raising rates in order to balance the need to support economic growth — and the return of the economy to maximum employment — and guard against a rapid increase in inflation, which can occur when growth runs too hot with very low unemployment.

Powell has not responded publicly to the criticism, but at the end of a Fed meeting this month, officials signaled they remained on track to raise interest rates twice more this year.

Trump considered several candidates to lead the Fed. None of them were widely viewed to be likely to stop raising interest rates this year. His three reported finalists were John Taylor, a Stanford University economist who has long argued for a mathematical “rules based” approach to interest rates that suggests rates should be higher than they currently are; Yellen, who raised rates three times in Trump’s first year as president; and Powell, who voted for all three of those rate increases as a Fed governor.

Fed nominees are typically noncommittal when asked about interest rates in their confirmation hearings, but Powell suggested in his appearance before the Senate Banking Committee last year that he was likely to stay the course that Yellen had set on rate increases.

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“If confirmed, I would strive, along with my colleagues, to support the economy’s continued progress toward full recovery,” he said. “Our aim is to sustain a strong jobs market with inflation moving gradually up toward our target. We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink.”