US economy

Fed's George says Trump isn't influencing her votes on rate hikes


President Trump’s criticism isn’t influencing the way Kansas City Fed President Esther George, long one of the central bank’s most hawkish members, conducts policy.

George offered the most candid view yet of the president’s repeated comments that he’s not happy that the Fed has continued to raise interest rates since he’s taken office. In an interview with CNBC’s Steve Liesman, George said this isn’t the first time a president has worried over monetary policy.

“Expressions of angst about higher interest rates are not unique to this administration. We know higher interest rates cause adjustments in the economy,” she said during an interview from the Fed’s annual retreat in Jackson Hole, Wyoming. “Congress anticipated this kind of tension whey designed the central bank, and they put firewalls in place so that the central bank could be independent and carry forth with its decision making.”

Thus far during Trump’s term, the policymaking Federal Open Market Committee has opted to hike its benchmark interest rate five times in quarter-point increments. In all, it has raised the funds rate seven times since December 2015 in an effort to normalize policy after the extreme accommodation brought on by the financial crisis.

George had been a relatively frequent dissenter during the days when the Fed held its rate near zero, arguing that it was important to begin the normalization process.

GDP likely will rise 3 percent this year, George added, a figure well above what Fed officials had been expecting though she expressed doubt about whether that can last.

“That is well above what the economy can operate at in a steady state, so I don’t think I see that continuing out for multiple quarters,” she said.

She indicated there are still several more hikes to go before the Fed gets to a “neutral” rate that is neither stimulative or restrictive — and that will happen despite the president’s misgivings.

“I don’t tell the president what to say, and again I go back to what’s important is how the institution is structured and how we think about our job,” George said. “So the job of the Federal Reserve, and I think the public should understand this, is that the institution is an independent one and Congress provided us the kind of firewalls that allow us to make decisions even when they may be unpopular across various aspects of the U.S. economy.”

Asked whether Trump is influencing her decisions, George said, “no.”



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.