White House economic advisers follow Trump’s cues on Fed
President Donald Trump has made a habit of lashing out at the Federal Reserve over interest rate hikes, but lately, his top economic advisers have joined in, too — breaking the code of conduct shared by bankers and economists to display solidarity with their boss.
The latest attack came from National Economic Council director Larry Kudlow, who said in multiple interviews last week that last year’s interest rate hikes were undermining the Trump administration’s campaign promise of attaining 3% sustained economic growth — a claim amplified on Trump’s own Twitter feed.
Kudlow called on the world’s most influential central bank to cut rates “immediately,” marking the first time a top administration official had publicly called for a cut — and specifically argued that the Fed should shave off half a percentage point, effectively erasing two of the four rate hikes the central bank agreed to last year.
“I am echoing the President’s view — he’s not been bashful about that view,” Kudlow said in an interview on CNBC, shortly after Axios published similar comments.
In recent weeks, Trump’s top economic advisers have upped their rhetoric about the supposedly disastrous effects of the Fed’s interest-rate hikes — all standard macroeconomic steps given the hot job market and rising demand. They’ve also raised alarms about the massive costs of the Green New Deal and other progressive agenda items proposed by Democrats, which the administration decries as “socialism” and warns could erode all of the gains of Trump’s economic policies over the last two years, from a historic tax overhaul in 2017 to revising the nation’s trade deals.
Kudlow’s remarks on Friday closely echoed those of Stephen Moore, another former television commentator-turned-distinguished fellow at the conservative Heritage Foundation, who Trump said he plans to nominate to the Fed Board of Governors. Moore has said the Fed was wrong to raise rates in September and December and has since called on the central bank to reverse course by cutting rates by half a percentage point.
Kevin Hassett, who heads the White House Council of Economic Advisers, on Tuesday carefully waded into the Fed’s rate-policy setting debate, suggesting the Trump administration’s economic growth forecasts include “what we’re used to seeing” without specifying a rate cut.
The federal funds rate, which influences the cost of mortgages, credit cards and other borrowing, stands at a range of 2.25% to 2.5%. A cut of 50 basis points would leave the rate floating between 1.75% to 2%. The Fed currently forecasts that rates will hover around 2.4% this year.
In December, Moore blasted Federal Reserve Chairman Jerome Powell and other members of the board after the last rate hike, saying they “should be thrown out for economic malpractice” and going so far as to suggest Powell — who was appointed by Trump — should resign from the role.
“I was really angry,” Moore told the New York Times in an interview last week about the December rate hike. “I was furious — and Trump was furious, too. I just thought that the December rate increase was inexplicable. Commodity prices were already falling dramatically.”
“I said these things that I do regret saying, because I think Powell’s doing the best job that he can,” said Moore. “Do I regret the rhetoric that I used? Yes. Was I right? Yes.”
Trump’s decision to choose Moore for the job is not the first time Trump has favored national television exposure and loyalty in his appointments during his administration. He is expected to nominate counterterrorism expert and former Fox News contributor Morgan Ortagus to be the new State Department spokeswoman, replacing Heather Nauert, a former Fox News anchor. Nauert had been Trump’s pick to be the US ambassador for the United Nations but later withdrew herself from consideration.
The White House has yet to officially submit Moore’s name to the Senate, where he will have to be confirmed. Already a number of discrepancies, including a $75,000 federal tax lien, could derail his nomination by the President. The White House has so far declined to comment on the issue.
Moore, who is not a Ph.D. economist and worked as one of the President’s 2016 campaign advisers, told Bloomberg that he and Trump “think a lot alike” when it comes to economic policy. “I really believe we can have 3 to 4 percent growth for the next five to six years.”
That echoes claims made by Hassett, who consistently sounds a sunny note on the economy in his own TV appearances, including Monday on CNBC.
“We’re seeing increased optimism,” Hassett said, citing rising wages and strong hiring.
Hassett on Tuesday acknowledged at a banking conference in Washington that there is a feedback loop between Trump and his advisers, recounting one of his early days on the job when the President was live-tweeting a television interview Hassett was doing — prompting questions Hassett couldn’t answer because he hadn’t seen the tweets.
The administration’s rosy outlook runs contrary to what most economists and the Fed believe given slowing global economic growth and other factors. The Fed lowered its forecast last month to 2.1%. That’s a sharp contracts to the Trump administration, which has predicted the economy will grow at an average of 3% each year over the next decade, including 3.2% this year.
Kudlow, in his Friday remarks, was willing to concede that there’s a “lot of weakness out there” globally. “Europe — euro zone virtually in a recession. China — very, very, very soft as we negotiate on trade. In the absence of inflation, with some of these global threats, our view is at some point… I wouldn’t mind seeing the Fed drop their target rate.”
Powell, meanwhile, has been trying to carefully thread the needle by saying the US economy remains steady, arguing he’s in “no hurry” to raise rates amid a number of risks to the global economy.
In March, the Fed took its patient approach even further, suggesting it would hold off on raising rates indefinitely until it has a better handle on where the economy is going for the rest of the year.
“I think we’re in a good place right now,” Powell told reporters at a press conference following last month’s two-day interest-setting meeting in Washington. “We’re being patient. We’re watching. We don’t see any data pushing us to move rates in any direction.”