Lawmakers, Wall Street shrug off Trump's escalating Fed attacks

Lawmakers, Wall Street shrug off Trump's escalating Fed attacks
© Greg Nash

GOP lawmakers are downplaying President TrumpDonald John TrumpDemocrats' CNN town halls exposed an extreme agenda Buttigieg says he doubts Sanders can win general election Post-Mueller, Trump has a good story to tell for 2020 MORE's escalating attacks on the Federal Reserve, saying his comments are unlikely to influence the central bank’s policy makers, many of whom were appointed by Trump.

Republicans on Capitol Hill said that while they may disagree with the substance of Trump’s remarks, they support his right to break with decades of White House precedent by publicly criticizing the Fed, an entity that fiercely guards its independence from politics.

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The president on Wednesday blamed the Fed for the steep stock market slide, telling reporters that the central bank “has gone crazy” and is “making a mistake” with its “ridiculous” rate hikes. Later that day he said the Fed “is going wild.”

Sen. Mike RoundsMarion (Mike) Michael RoundsGOP gets used to saying 'no' to Trump On The Money: Wells Fargo CEO steps down | Trump vows to keep funding for Special Olympics | House panel approves marijuana banking bill | Controversial Fed pick gains support in Senate Controversial Fed pick gains support in GOP Senate MORE (R-S.D.), a member of the Senate Banking Committee, said Trump is just expressing his opinion.

“I have no objection to him sharing his thoughts on it just like all of us like to share our thoughts on it,” Rounds said. "I don't think it will pose a challenge to the Fed's independence.”

In July, Trump broke two decades of White House silence on the Fed’s monetary policy when he said he was “not thrilled” about interest rate hikes. The following month he made similar remarks but also expressed displeasure with Chairman Jerome Powell. Trump nominated Powell to replace former Fed chief Janet YellenJanet Louise YellenSenate needs to stand up to Trump's Nixonian view of the Fed The Hill's 12:30 Report: Washington braces for Mueller report Trump struggles to reshape Fed MORE, an Obama-era appointee.

Trump escalated his attacks this past week as the stock market suffered a significant slide on Wednesday and Thursday. He explicitly pinned blame on the Fed, which has raised interest rates toward historically neutral levels.

“I don't know what their problem is,” Trump said late Wednesday.

His barbs did little more than raise eyebrows on Wall Street, and the market did not appear to move in response to the president’s comments.

Karen Petrou, managing partner at Federal Financial Analytics, said it was “fascinating … how immediately U.S. markets totally discounted what the president said.”

She said the yawning reaction on Wall Street is likely a sign that traders “are getting used to him saying a lot of things that no president has said before and they have confidence in the Fed’s strength and independence.”

Sen. Sherrod BrownSherrod Campbell BrownOn The Money: Treasury misses second Dem deadline on Trump tax returns | Waters renews calls for impeachment | Dem wants Fed pick to apologize for calling Ohio cities 'armpits of America' | Stocks reach record high after long recovery Sherrod Brown asks Trump Fed pick why he referred to Cleveland, Cincinnati as 'armpits of America' Only four Dem senators have endorsed 2020 candidates MORE (Ohio), the top Democrat on the Senate Banking Committee who’s up for reelection this year in a state Trump won in 2016, said Trump’s attacks on the Fed are a symptom of his governing style.

“People are so used to this president commenting on everything and being critical of everybody else and pointing fingers — it's always somebody else's fault — of course he's going to do it,” he said.

Unlike previous presidents, lawmakers have been critical of the Fed throughout the bank’s history. A 2016 measure sponsored by Sen. Rand PaulRandal (Rand) Howard PaulDem super PAC campaign urges Republicans to back impeachment Booker, Harris have missed most Senate votes Trump vetoes measure ending US support for Saudi-led war in Yemen MORE (R-Ky.) to audit the Fed came within seven votes of passing the Senate.

But GOP supporters of that effort, which would have allowed more government oversight of the independent institution, said they respect the Fed’s independence and don’t think that Trump is working to undermine the bank.

Banking Committee Chairman Mike CrapoMichael (Mike) Dean CrapoGraham says he's 'not interested' in Mueller testifying Senate needs to stand up to Trump's Nixonian view of the Fed Senate bill seeks to bring freedom back to banking MORE (R-Idaho) said Trump’s criticisms won’t sway the Fed, but he declined to comment on whether it was appropriate for the president to blast the bank.

Crapo’s predecessor as the Banking panel chairman, Sen. Richard ShelbyRichard Craig Shelby20 Dems demand no more money for ICE agents, Trump wall Conservatives urge Trump to stick with Moore for Fed Poll: Roy Moore leading Alabama GOP field MORE (R-Ala.), said he’s confident the Fed will follow the data, not Trump.

"Price stability is important to all of us, so let's see what the Fed does, how they do it,” Shelby said. “But they probably have information that maybe we don't have.”

For almost four decades, the Fed has operated under a congressional mandate to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.”

Most Republicans are eager to see the Fed neutralize interest rates as unemployment falls into record-low territory and inflation begins to pick up. But Trump has blasted the Fed for raising borrowing costs, saying the rate hikes are suppressing the stock market, his favored metric for economic success.

Stock markets have registered significant gains since Trump took office, and analysts say they’re poised for a correction. While higher interest rates are weighing on markets, traders have also been rattled by the protracted U.S.-China trade war.

“The stock market is [Trump’s] economic report card, so if it’s in the red he’s falling, and he’s going to do anything he can to get that in green,” said Mark Zandi, chief economist at Moody’s Analytics.

“Investors are discounting what the president is saying. They're not putting any weight on his criticism or protestations,” Zandi said, adding that investors have already priced in a likely December rate hike by the Fed.

Trump has few options to sway the Fed even if he decided to take action. The president is prohibited by law from firing the Fed chairman for anything other than extreme misconduct, and Republicans are unlikely to support Fed nominees seen as cronies to the president.

“This is a lot of noise, but at the end of the says nothing of substance,” Zandi said. “He’s not going to try to replace Powell or pack the Fed that are only sympathetic to his perspective.”