Trump attacks on the Fed undermine economic stability, Yellen says

Federal
Reserve Chairman Janet Yellen adjusts her glasses as she
testifies on Capitol Hill in Washington, Tuesday, June 21, 2016,
before the Senate Banking Committee. Yellen said the U.S. economy
faces a number of uncertainties that require the Fed to proceed
cautiously in raising interest rates.
AP/Evan Vucci

• Former Federal Reserve Chair Janet Yellen has launched
  a stinging attack on President Donald Trump, warning that his
  public criticisms of the central bank risk undermining “social
  and economic stability” in the US.
• In an interview with the Financial Times, Yellen said
  Trump’s repeated criticisms could undermine confidence in the
  Fed, with possibly dire consequences.
• Trump has frequently attacked the Fed, calling its
  interest-rate hikes “loco,” and saying it is the biggest risk
  to the US economy.
• His opposition to the Fed stems from his dislike of
  high interest rates.

Former Federal Reserve Chair Janet Yellen has launched a stinging
attack on President Donald Trump, warning that his public
criticisms of the central bank risk undermining “social and
economic stability” in the US.

The Fed is currently moving away from the ultra loose
monetary policy it enacted during the financial crisis, and has
raised interest rates eight times in the past three years,
including three so far in 2018. Trump has a longstanding dislike
of high rates, and as such
 has frequently
attacked the central bank, and its current chairman, Jerome
Powell, in recent months. 

Most recently, Trump criticised the central
bank during an interview with the Wall Street Journal this week,
bashing Powell and attacking the Fed as the “biggest risk”
to the US economy. He has previously said the central
bank “has gone crazy” and called its
interest-rate hikes “loco.”

Speaking to the Financial Times, Yellen made clear her
opposition to Trump’s position, saying she believes such an
approach has “the potential to undermine confidence in the
institution [the Fed].”

Trump’s criticisms, she added, are “whittling away the
legitimacy and stature of institutions the public has
traditionally had some confidence in. I feel it ultimately
undermines social and economic stability.”

This does not just apply to the Fed, Yellen said, but also
other major public institutions like the FBI, which Trump has
also subjected to frequent vociferous criticisms during his time
in the White House.

“If the public has lost confidence in the Fed in a serious
way, that will be reflected presumably in congressional actions
towards the Fed,” she added, suggesting that Federal Reserve
independence could be at stake.

“To totally undermine these institutions that are assets to
the United States and the globe is worrisome.”

Yellen left her post as Fed chair at the beginning of 2018
after serving a four-year term. Prior to Trump’s election many
believed that she would be granted a second term, but Trump
decided to pursue his own head.

Yellen, however, thinks that Trump briefly considered
keeping her on at the helm of the central bank. “I have some
reason to believe he wondered if it might be a mistake to replace
me after meeting with me,” she told the FT.

“I think when I walked out of that interview he thought to
himself, ‘Gee, she is really good and I really like her.'”