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Tuesday, February 25, 2020  Spokane, Washington  Est. May 19, 1883
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Trump escalates attacks on the Federal Reserve

Interest rate increases overseen by Fed Chairman Jerome Powell and the Fed board have come under fire from President Trump as a threat to contninued economic growth. (Associated Press)
Interest rate increases overseen by Fed Chairman Jerome Powell and the Fed board have come under fire from President Trump as a threat to contninued economic growth. (Associated Press)
By Heather Long and Damian Paletta Washington Post

WASHINGTON – President Donald Trump on Monday criticized Federal Reserve Chairman Jerome Powell for raising interest rates, breaking with recent presidents’ practice of not commenting on the Fed’s handling of the economy.

“I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said in an interview with Reuters. He urged the Fed to avoid doing anything that could slow economic growth.

The benchmark U.S. interest rate, which plays a large role in setting borrowing costs for mortgages, credit cards, small business and auto loans, was set at a range of 0.5 percent to 0.75 percent when Trump was sworn in. The benchmark rate is now in a range of 1.75 percent to 2 percent, and the Fed has indicated it is likely to increase rates two more times before the end of the year.

Trump since July has repeatedly criticized the Fed, an independent body that is not controlled by Congress or the president. Powell, a Republican, has repeatedly said he believes in the Fed’s independence and that he and his colleagues that set interest rates will not bow to outside pressure.

Recent presidents have largely avoided criticizing the Fed, trying to preserve the bank’s independence and its credibility with financial markets, foreign governments and the public.

The Fed is raising rates in an effort to keep prices stable and to prevent the economy from overheating, but Trump has complained the increased rates are obstacles to economic growth. Republicans are putting the strong economy at the center of their campaign agenda ahead of the midterm elections, as they work to retain control of the House and Senate.

Trump selected Powell for the job last year from a short list of several prominent central bankers, praising Powell for his “wisdom” and “leadership” skills when he nominated him formally in November. Less than a year later, he is calling into question Powell’s stewardship of the economy.

The president’s top economic advisers have repeatedly urged Trump not to attack the Fed. Treasury Secretary Steven Mnuchin recently told reporters he had personally spoken to Trump about the central bank and the president respects the independence of the Federal Reserve. But that stands in contrast with the president’s own words, which are often very critical of Powell and suggest the Fed should be moving in a different direction.

The Fed declined to comment, but former Fed officials expressed alarm at Trump’s repeated criticism.

“I’m very concerned, especially given this very divisive and highly politicized environment, that bringing the Fed into that environment could complicate the Fed’s communications to the public, it’s support in the Congress and among the American people,” said Donald L. Kohn, who spent 40 years at the Fed and retired as its vice chairman in 2010.

But Kohn said it does put more pressure on Powell and other Fed officials to explain their actions and their perspectives. He said the Fed was designed so that it would be accountable to policymakers and the public, but it was also designed to be somewhat independent from jawboning from the White House. Kohn said he didn’t think Powell or the Fed would change their course because of Trump’s remarks.

“I don’t see their (the Fed’s) actions as being particularly affected by all this,” he said.

Powell has described the economy as “strong” numerous times this summer, but he also sees this as an opportune time to lift interest rates back to normal levels after years at historic lows, a Fed effort to stimulate the economy in the aftermath of the financial crisis and Great Recession.

Wall Street analysts near universally expect the Fed will raise rates at its next meeting at the end of September.

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