During a CNBC interview on Friday, President Donald Trump has said that he’s “not happy” with the Federal Reserve raising interest rates, and that he thinks doing so undermines any work he does for the economy.
What is the Federal Reserve?
The Federal Reserve was created in 1913 to provide stability to U.S. currency. The Fed supervises and regulates banks and financial institutions, maintains “stability of the financial system” and tries to contain “systemic risk that may arise in financial markets.” It plays a “major role” in the U.S. government’s financial transactions with foreign nations.
An important part of the Fed’s role is its political independence. This allows it to make moves that it believes are in the best interest of the U.S. economy, even if those decisions are seen as unpopular by the party in power.
During his presidency, Richard Nixon had pressured the chairman of the Federal Reserve into keeping rates low, a fact revealed on the tapes he infamously used to record this and thousands of hours of other conversations. When it came to interest rates, Nixon told his advisers “we’ll take inflation if necessary, but we can’t take unemployment.” The country ended up with both. Since then, the Fed has generally made an effort to prove its independence.
The current Fed chairman, Jerome Powell, is a Trump appointee.
Why does the Federal Reserve raise interest rates?
The Fed raises interest rates as the U.S. economy strengthens, in an effort to prevent inflation from getting out of control.
What did Trump say?
During the same CNBC interview where he said he would consider slapping tariffs on all imports from China, Trump criticized the Fed for raising interest rates.
I put a very good man in the Fed. I don’t necessarily agree with it, because he’s raising interest rates, I’m not saying that I agree with it, and I don’t necessarily agree with it. I must tell you, I don’t. I’m not thrilled because we go up, and everytime we go up they want to raise rates again, and I don’t really — I am not happy about it, but at the same time I’m letting them do what they feel is best.
He went on to say:
Now, I’m just saying the same thing that I would have said as a private citizen. So somebody would so ‘oh, maybe you shouldn’t say that as a president.’ I couldn’t care less what they say, because my views haven’t changed. I don’t like all of this work that we’re putting into the economy, and then I see rates going up, I see China where they’re — I mean look at what’s happening with their currency, it’s dropping like a rock.
After Trump’s comments, and the backlash that followed, the White House released a statement that read, in part:
Of course the President respects the independence of the Fed. As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions.