President Trump should leave the Fed alone

President Trump should leave the Fed alone

President Donald Trump said on Friday he has picked Stephen Moore, an economic commentator affiliated with a conservative think tank, for a seat on the Federal Reserve's Board of Governors.

The president was harshly critical of the Fed's rate hikes last year and has continued to criticize actions by Fed Chairman Jerome Powell even after the central bank this week announced it expected no rate hikes this year.

"Trust me, Steve knows absolutely nothing about the Federal Reserve or monetary policy", Bruce Bartlett, a supply-side economist who served in the Republican administrations of Ronald Reagan and George H.W. Bush, said on Twitter.

Given his sharply partisan reputation, Moore could spark opposition among Democrats in the Senate.

He argued that Mr Trump's policies had created a global demand for dollars by increasing the attractiveness of the U.S. as a place for investment and said the Fed had worked at cross purposes to that by tightening credit and withdrawing money from the economy.

Followed by the reveal of latest Fed policy, there had been signs of reverting back interest rate lower for loans used to purchase house and cars, eventually prodding the United States citizens to purchase more. He nominated four of the current five members.

There are now two vacancies on the seven-member Fed board, and nominations have to be approved by the Senate.

After the Wednesday announcement, financial markets, which had already priced out any chance of a rate hike this year, began pricing in the likelihood of a rate cut next year.

After months of the President's hectoring about interest-rate hikes, Powell in January put monetary policy on hold, then dined with him at the White House a few days later. Moore proposed that the Fed set short-term rates with the goal of stabilizing volatile commodity prices, rather than focusing on targeting overall inflation of 2 percent.

But he added, "over time obviously we want to reduce that balance sheet and not have these massive amounts of debt".

The choice of Moore drew broad criticism, as economists across the spectrum noted that Moore's writings and comments seemed to confuse basic concepts, and had been wildly inconsistent over time.

Moore joined CNN as a contributor in early 2017. And he contended that this approach, if adopted, would help accelerate economic growth above 3 percent, compared with the longer-run average of 1.9 percent that Fed officials have forecast. And they tightened, I mean, they did $50 billion a month.

"His policies appear to be going the wrong way", Sumner said.

Powell has said the Fed took those decisions without regard to politics but purely in response to slowing global and US growth and low inflation.

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