by Barkley Rosser originally published at Econospeak, “Trump and the Fed”
It may be way too soon to say anything sensible about what Trump thinks about the Fed or will do about it, but as the first person to have publicly called for appointing Janet Yellen as Chair (back in 2009), I figure I am more situated to stick my neck out to say something, especially when it looks like what is coming is a big contradictory mess.For the moment the Fed seems to be laying low, having made almost no change in policy or projections as reported by the diligent …Tim Duy. They remain open to maybe tightening after March if the employment report improves notably, but otherwise seem to be on a “steady as you goes” path for the moment, doing almost nothing. This on top of a letter from Congressman McHenry demanding they stop cooperating with any international banking entities until Trump makes appropriate appointments. And Tim adds a comment on a recent column by former Fed gov Kevin Warsh, who indulged in criticizing the Fed by demanding that it follow policies it is already following. In this latest post Duy suggests that perhaps Warsh is running for Fed Chair, which means one has to appear to criticize Fed policy, even if one is not really. Which raises the question of what Trump will do.
Let us start with something that hardly anybody has noticed, but is just taken for granted: that Trump almost certainly will not reappoint Janet Yellen as Chair. This just seems to follow from his general attitude that all incumbents are no good, and especially anybody appointed by Obama, except for FBI Director Comey. Why she is no good is not immediately obvious, and in fact several times over the last two years he praised her “low interest rate policies” noting that as an old real estate developer he has always been a fan of such policies. However, in June of this past year when the Fed did not raise the fed funds target rate, he denounced her personally and the Fed more generally for not doing so, charging that their failure to do so was part of a plot to goose the economy in an effort to help elect Hillary Clinton. Given that rhetoric it seems unlikely that he would reappoint her, although it could still come to pass that if when her term comes up next year markets seem to like her as well as GOP commentators, he could change his mind.