Donald Trump says Fed chief Jerome Powell is threatening economic growth

Donald Trump says Fed chair Jerome Powell is threatening US economic growth and appears to enjoy raising interest rates.

Jerome Powell “almost looks like he’s happy raising interest rates”, says Donald Trump. Pic: AFP

Donald Trump has again escalated his attacks on Federal Reserve Chairman Jerome Powell, blaming him for threatening US economic growth and saying he appeared to enjoy raising interest rates.

In an interview with The Wall Street Journal, Mr Trump acknowledged the independence the Fed has long enjoyed in setting economic policy, while also making clear he was intentionally sending a direct message to Mr Powell that he wanted lower interest rates.

“Every time we do something great, he raises the interest rates,” Mr Trump said, adding that Mr Powell “almost looks like he’s happy raising interest rates.”

The President declined to elaborate, and a spokeswoman for the Fed declined to comment.

Mr Trump said it was “too early to tell, but maybe” if he regrets nominating Mr. Powell.

Fed officials have raised their benchmark rate three times this year, most recently in September to a range between 2 per cent and 2.25 per cent, and most officials expect to raise it again at their December meeting. Mr Powell has said the Fed wants to raise rates at least to a so-called neutral level that seeks to neither spur nor slow economic growth.

The President’s caustic comments about Mr Powell came as Mr Trump repeatedly described the economy in personal terms.

He referred to economic gains during his time in office as “my numbers,” saying, “I have a hot economy going.”

He described his push for growth as a competition with former president Barack Obama’s record, saying that increases under his Democratic predecessor were skewed because of low interest rates.

In the 30-minute interview in the Oval Office, Mr Trump also touched on his approach to tariffs, the controversy unfolding over the death of Saudi Arabian dissident Jamal Khashoggi, his eagerness to pass a second tax cut, and his thoughts on his former attorney, Michael Cohen.

Asked an open-ended question about what he viewed as the biggest risks to the economy, Mr Trump gave a single answer: the Fed

“To me the Fed is the biggest risk, because I think interest rates are being raised too quickly,” the President said just before he pushed a red button on his desk, summoning an iced cola delivered to him on a silver platter.

Donald Trump, in the Oval Office. Pic: AFP

Mr Trump demurred when asked under what circumstances he’d remove Mr Powell. “I don’t know,” he said. “I’m just saying this: I’m very unhappy with the Fed because Obama had zero interest rates.”

He said the Fed was supposed to be independent “in theory,” but said his instinct was that interest rates are being raised too quickly.

Citing the rate increases, Mr Trump said, “How the hell do you compete with that? And Obama -- remember this, it’s very important -- Obama had zero interest,” the President said.

The Fed held interest rates at ultralow levels for years after the financial crisis amid anaemic growth both in the US and abroad, and began slowly lifting rates in December 2015.

The law isn’t clear about whether Mr Trump could dismiss Mr Powell even if he wanted to do so. The Federal Reserve Act, as amended in 1935, says Fed governors can be removed by the president “for cause.” The stipulation applies to the board’s governors, who serve 14-year terms, and not to the Fed chairman, who serves a four-year term concurrent with a 14-year term as governor.

The Fed has enjoyed relative independence in setting policy because it is charged by Congress with making sometimes-unpopular decisions, such as when to raise rates. Before Mr Trump, the last president to publicly call for lower interest rates was George HW Bush. He blamed Alan Greenspan’s decision not to keep rates lower after the 1990-1991 recession for contributing to his election defeat in 1992.

White House attacks on the Fed could take on more significance if they’re echoed by congressional lawmakers because the Fed ultimately answers to Capitol Hill. That hasn’t occurred since Mr Trump took office.

With Rebecca Ballhaus, Peter Nicholas and Alex Leary

wall Street Journal