Jerome Powell, chairman of the U.S. Federal Reserve, walks the grounds during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City, in Moran, Wyoming, U.S., on Friday, Aug. 24, 2018. While Powell said U.S. productivity has been low for a decade or longer, his comments suggest he would want to accommodate with low interest rates any rise in efficiency across the American economy. Photographer: David Paul Morris/Bloomberg
Jerome Powell, chairman of the US Federal Reserve, has apparently dismayed Trump. Bloomberg

US Fed says Trump has little effect on decision making

Federal Reserve officials are trying hard to ignore President Donald Trump, and they’re going to keep doing that even if he continues to put pressure on the central bank to slow down or stop its gradual increases in interest rates.

At the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming, several policymakers responded to questions about recent remarks by Mr Trump with straightforward comments that their rate decisions won’t be affected.

“The job of a central bank and my job is to make decisions on monetary policy without regard to political considerations or political influence,” Dallas Fed President Robert Kaplan said. “I’m very confident we’ll do that.”

Mr Trump told a group of Republican donors earlier this month that he was disappointed with his appointee, Fed chairman Jerome Powell, over interest-rate hikes, having expected Mr Powell to be a cheap-money central banker. That followed complaints last month, including via Twitter, about Fed rate hikes.

Pressed on whether Mr Trump’s comments don’t at least complicate their job, Mr Kaplan and his colleagues mostly shrugged and repeated the line that the Federal Open Market Committee will simply carry on with its job.

“This committee is very focused on the mandate given to us by Congress to try to make decisions that are in the long-run interest of a growing economy,” said Esther George, president of the Kansas City Fed and host of the event that annually draws leading central bankers and economists from around the world to Grand Teton National Park.

On the sidelines, a number of the conference attendees said the Fed has very little choice but to demonstrate a thick skin and ignore the president. A suggestion that Fed officials should respond by raising rates more aggressively to prove their independence was roundly rejected, as was the idea that Mr Powell should warn the president publicly against further commentary on rates.


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“I think he should avoid any tit-for-tat exchanges with the president,” said Alan Blinder, a former Fed vice chairman. Mr Powell, he added, should respond mostly with actions to show the Fed will act independently and remain focused on making the right decisions for the economy.

The chairman has made no public response about Mr Trump’s comments. He said on July 12 that the Fed does its work “in a strictly nonpolitical way, based on detailed analysis” that doesn’t take political considerations into account.

Another former Fed vice chairman, Donald Kohn, said he was confident the committee would not be distracted from following its legislative mandate, but added that Mr Powell could help shield the Fed from pressure by better communicating to the public the rationale for its policy decisions.

“The key is the Fed has to continue to explain in economic terms why it’s doing what its doing, and how it’s related to its objectives,” he said.

Other attendees noted the irony that Mr Trump is complaining about rate hikes, since Mr Powell is widely seen by economists as having taken a very cautious approach so far to tightening policy, even as US economic growth accelerates and unemployment, now at 3.9 per cent, is at levels not seen in nearly 20 years.

“I am sure that the Fed is not going to depart from its a very responsible strategy,” said Jacob Frenkel, chairman of JP Morgan. “It may be politically attractive to bash the Fed for short-term causes. But really, it will not change anything.”

The Fed has raised rates five times since Mr Trump took office in January 2017, a slower pace than during most past economic expansions.

At Jackson Hole on Friday, Mr Powell said gradual increases will remain appropriate, but he made clear that with inflation still low he was not worried about the economy overheating and would not seek a more aggressive policy unless inflation expectations jumped.

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