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Manhattan Institute

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What the Fed Really Fears

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What the Fed Really Fears

New York Post August 3, 2019
EconomicsEmploymentMonetary Policy

President Trump has made his desires overwhelmingly clear when it comes to monetary policy: He wants lower interest rates so the economy can take off “like a rocket ship.” And he hasn’t been shy about voicing his disappointment with Jerome Powell, whose mission at the helm of the Federal Reserve is to keep prices steady and the economy moving like a tractor on a country road — rather than a rocket ship.

Trump got his way Wednesday when the Fed announced a quarter-point rate cut. The smart money is that Powell acted in response to political pressure from the president. But the smart money may not be so smart: Any Fed chairman worth his salt knows the price of a misstep is too high to play politics.

Fact is, Powell cut rates this week because he and his colleagues are legitimately worried about a slowdown — not about Trump’s tweets.

Not that the tweets aren’t a cause for concerns. The president’s loud hankering for lower rates is especially troubling at a time when the US economy is chugging along fine. The labor market added 164,000 jobs in July, meeting economists’ expectations. The unemployment rate held steady at 3.7%, just a 10th of a percentage point above the 50-year low.

Continue reading the entire piece here at the New York Post

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Beth Akers is a senior fellow at the Manhattan Institute and a former Council of Economic Advisors economist. Follow her on Twitter here.

Photo by Nikada/iStock

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