Former New York Fed president says Trump is a threat to the economy and the Fed should act accordingly

Former New York Federal Reserve President Bill Dudley appreciates that Federal Reserve Chair Jerome Powell and his colleagues try to remain apolitical. He just doesn't think it's feasible anymore.

In a column published by Bloomberg, Dudley wrote that Fed officials should at least entertain the idea of explicitly stating that they won't keep accommodating the Trump administration with interest rate cuts as it continues to make what he considers to be "bad choices," particularly when it comes to trade policy with China. He argues that the Fed taking a harder line with the White House would benefit the economy by discouraging an escalation of the trade war, asserting the central bank's independence, and allowing the Fed to avoid slashing rates when they are "already very low by historical standards."

Dudley added that the Fed could step even more deeply into the fray, with an eye on the next election cycle. He makes the case that remaining apolitical actually prevents the Fed from performing its most vital task, which is pursuing stable prices and maximum employment.

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"After all, Trump's reelection arguably presents a threat to the U.S. and global economy, to the Fed's independence, and it's ability to achieve it's employment and inflation objectives," he wrote. "If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020." Read more at Bloomberg.