Minneapolis Federal Reserve President Neel Kashkari has come out with a stern rebuke of Fed policy in the Trump era, urging the central bank to lower interest rates.
“In my view, these rate increases were not called for by our symmetric framework,” Kashkari said while giving a speech in California.
“With inflation somewhat too low and the job market still showing capacity after 10 years, the only reasonable conclusion I can draw is that monetary policy has been too tight in this recovery,” he added.
Kashkari believes it was a mistake to tighten monetary policy while inflation was at relatively low levels. He feels the Federal Open Market Committee should allow inflation to run higher than the target of two percent in order to further stimulate the economy.
This is music to the ears of President Donald Trump, who wants the Fed to keep interest rates low to goose the economic boom that he brags about constantly.
China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go…
— Donald J. Trump (@realDonaldTrump) April 30, 2019
….up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!
— Donald J. Trump (@realDonaldTrump) April 30, 2019
Kashkari is suggesting policy proposals that are in line with Trump’s recommendations.
“I believe that we misread the labor market, thinking we were at maximum employment when, in fact, millions of Americans still wanted to work, and fearing that if we hit maximum employment, inflation might suddenly accelerate, and we would then have to raise rates quickly to contain it,” Kashkari said.
“The headline unemployment rate has been giving a faulty signal,” he added.
Austrian economists such as former Reagan budget director David Stockman feel Trump’s push for lower interest rates signals economic doom.
“He’s conducting a war on the nation’s solvency with a fiscal policy that is more out to lunch than anything I’ve seen since 1970,” Stockman said.
Another Austrian economist, gold enthusiast Peter Schiff, is also critical of the monetary policy lobbied for by President Trump.
“I think Trump knows the only chance he has of postponing the onset of this recession until beyond the 2020 election is to get the Fed to preemptively cut interest rates and launch [another round of quantitative easing], which is something that Trump also says he wants,” Schiff said.
Before he was elected President, Trump also agreed with the Austrian analysis of the Federal Reserve’s easy money policies.
“They’re keeping the rates artificially low so the economy doesn’t go down,” Trump said in 2016. “So that Obama can say he did a good job. That’s the only reason that the rates are so low. They’re keeping the rates artificially low so that Obama can go out and play golf after January and say that he did a good job. But it is a very, a very false economy. So [Obama] can leave office and say: See I told you.”
“At some point the rates are going to have to change,” Trump added. “The only thing that is strong is the artificial stock market.”
The rates will apparently not change under Trump’s watch, as long as he has anything to say about it.
