President Donald Trump warned the Federal Reserve not to raise interest rates, ahead of a meeting where the Federal Open Market Committee will decide whether or not to do just that.
What did Trump say?
In a tweet on Tuesday, Trump said that the Federal Reserve should "take the Victory" of a strong U.S. dollar while "the outside world is blowing up around us," instead of raising interest rates.
It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!
— Donald J. Trump (@realDonaldTrump) December 17, 2018
Jerome Powell, the current Federal Reserve chairman, was appointed to his position by Trump.
What's the significance?
The Federal Reserve periodically raises interest rates during periods of economic growth to prevent inflation from getting out of control.
During his presidency, Richard Nixon convinced the Federal Reserve to keep interest rates low, reasoning that inflation was better than any rise in unemployment due to rising interest rates. The economy ended up with both higher inflation and higher interest rates, and the Fed made a commitment to be politically independent.
Has Trump tried to influence the Federal Reserve before?
On July 20, Trump told CNBC that he was "not happy" about the Federal Reserve raising interest rates. Trump argued that he was still respecting the Federal Reserve's political independence because he wasn't voicing his advice for them in his role as president.
"Now, I'm just saying the same thing that I would have said as a private citizen," he said during the interview. "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 this interview, the White House defended Trump's decision to voice his opinion about the Federal Reserve's interest rate decisions.
"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," the White House said in a statement.