Trump vs. the Fed

President Trump upended "long-standing White House protocol" by attacking the Federal Reserve's decision to raise interest rates

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"Independence from presidential criticism has long been a hallmark of the Fed's existence," said Jim Tankersley at The New York Times. Last week, in a televised interview, followed by a flurry of tweets, President Trump upended "long-standing White House protocol" by attacking the Federal Reserve's decision to raise interest rates. With two increases this year, the Fed has hiked its short-term interest rate to 2 percent. It plans to raise rates twice more before year's end, to keep a lid on inflation and return interest rates, at historic lows since the 2008 bank crisis, back to normal levels. Trump believes the Fed's moves could "derail" the White House's efforts to spur the economy. Although the economy has momentum and unemployment remains low, wages are still stagnant. If the Fed raises rates too fast, it could halt growth. But if it moves too slowly, the economy "could overheat and ignite a rapid spiral of price increases," prompting a recession. "It's a delicate political and economic balance." Instead of chastising Jerome Powell, the Fed chairman he appointed himself, Trump should be thanking the Fed, said Caroline Baum at Market​Watch. The Fed's careful approach is designed to avoid "slamming on the brakes" when inflation accelerates, "sending the economy into recession just in time for the 2020 election."

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