Fed ignores Trump's tweets

As expected, the US Federal Reserve kept its funds target range unchanged at 2.25-2.50 percent at the end of today's FOMC session.  The decision was unanimous.  The FOMC statement noted that employment remains strong, while inflation is running just below the 2 percent target and inflation expectations remain well-anchored.  In view of the domestic and international economic situation and muted inflation pressures, the Fed promises to be "patient" in determining future rate moves.

One place where there is little inclination to be "patient" about Fed policy is, no surprise, the Oval Office.  The Fed has raised rates eight times since Donald Trump took office, and Trump has become steadily more irate about the central bank's independence. In truth, it can with hindsight be argued that the Fed could have eased up on the brakes just a little.  The absence of wage and price pressures suggests that the economy, and particularly the jobs market,  can operate closer to full capacity than was the case in the past. That said, at its current level the funds rate remains very low by historical standards, and Chairman Jerome Powell and his colleagues can hardly be accused of endangering the economy, at least not by anyone who actually knows what he is talking about.

One interesting angle to Trump's most recent tweets about the Fed is that he seems to have some vague idea that his insane fiscal policy may become something to worry about. In calling for the Fed to cut rates and resume quantitative easing this week, Trump claimed such moves would send the economy up "like a rocket" and at the same time,  "make our national debt start to look small".  That's doubtful: it has been calculated that the deficits run by the US since Trump took office, driven by his tax cuts, would have fully paid for the entire US effort in World War II, after making the necessary inflation adjustments.

In any case, it's unlikely that the FOMC paid serious attention to this, except maybe during their coffee break.  Still, it's worth noting, because Republicans habitually only gripe about government borrowing and debt when it's Democrats who are doing the spending. Just who put this thought in the President's ear?