Fed Considers Rate Cut as Political Pressure Mounts
Now, our main story this morning, just how President Trump's repeated hectoring of the Federal Reserve has complicated interest rate decisions. Here's what the president had to say to CNBC yesterday in response to a question about whether he thought the fed had listened to him. Listen to me, and get a we have people, it's more than just Jay Powell. We have people on the fed really weren't, you know, they're not might people. So how has this changed the environment in which the fed must determine whether economic conditions warrant a rate cut are fed reporter, Nick Tim Roche has been speaking to Charlie Turner from Washington. Well, let's be up front about this Nick has any fed chief ever faced such pressure before, from a president actually, yes, you could probably say that this is something fed cheers in the postwar period, have faced, what's different about President Trump? Is that his criticism has been much more public of the fed? So just to. Go back in time in the nineteen sixties, the fed chairman by the name of William mcchesney Morgan was very unpopular with president Johnson recall Johnson was trying to boost domestic spending while fighting the Vietnam war, and he did not like the fact that the fed was raising borrowing costs to limit inflation. And so he was very critical privately of Martin. There's a story about how he pushed him up against the wall said my boys are dying in Vietnam. And you won't give me the money I need. So there is a history of presidents putting pressure usually in private on the fed chair. What's different about this president is that he does it pretty often in public via Twitter via interviews or off the cuff statements to reporters on his way to Marine One helicopter. And so it creates a perception problem for the fed because the fed doesn't want to be seen by the markets is responding to anything but the economic and financial. Data that they analyze that could change the way investors. Think about inflation, and bond yields, and so forth. You described three challenges fed chair pal is navigating at this point. What are they so the fed has to set the right interest rate of the right time? The fed has to explain clearly, what they're doing and why they're doing it, and those are two challenges that every fed leader faces, but the third one is unique as we've talked about. And that is he has to deal with this public pressure, campaign, very loud, criticism from the president something that we haven't seen since the early nineteen nineties President George Bush senior was the last president who even said publicly what he thought the fed should be doing President Clinton and his two successors Bush, and Obama maintained this rule where they were not going to comment on the fed, and Clinton's advisers convinced him. This was a good policy for them because they had seen how President Bush. This is a first President Bush had called on Greenspan to lower rates. And Greenspan didn't go along with it. And so Clinton's advisers told him, look, you really don't have anything to gain by pressuring the fed. They're going to do what they think they need to do. And you putting pressure on them isn't gonna make their life any easier. They may feel like they have to do the opposite to to, you know, to look independent so Clinton and then Bush forty three and Obama never said anything about the fed, and that was a tradition that continued up until about a year and a half into Donald Trump's presidency doesn't fed chairman pal. Face pressure to cut rates for the rest of the year, including at the June meeting. So the Fed's next meeting is in less than two weeks on June.