If you ask Kansas City Fed President Esther George, Donald Trump can tweet about the dollar and low rates until the cows come home if that’s what floats his boat, but it’s not going to have any impact on how she thinks about monetary policy.
George is notoriously hawkish, so you’ve got to think Trump’s recent broadsides (here and here) against the trajectory of Fed policy seem especially anathema to her ears. In an interview with CNBC from Jackson Hole published Thursday, she flatly rejected the notion that Trump’s rhetoric could sway her on rates.
She also acknowledged what the financial media and some of Trump’s defenders have been variously shrieking about all week – namely that this is hardly the first time someone has questioned whether rate hikes are a good idea.
“Expressions of angst about higher interest rates are not unique to this administration”, she told CNBC’s Steve Liesman, adding that obviously, the Fed “knows higher interest rates cause adjustments in the economy.”
George was also quite candid about the Fed’s past failings when it comes to misjudging spillover risks from international events. Asked specifically about Turkey, she contended that she doesn’t yet see contagion, but implicitly notes that she could just be missing it.
On Trump and Fed independence, George takes comfort in the notion that “Congress anticipated tension when they designed the central bank, and they put firewalls in place so that the central bank could be independent and carry forth with its decision making.”
Asked specifically whether she’s “ignoring the President”, George said this:
I’m not … I’m focusing on the mandate that Congress has given us.
Here’s the video:
That’s all fine and good, but from where I’m sitting, market participants and financial journalists are making the same mistake here that political commentators and legal scholars are making when it comes to the prospect of the President being indicted.
The bottom line is that precedent aside, Trump can remove Jerome Powell just like precedent aside, Trump can in fact be indicted.
But irrespective of whether her colleagues are inclined to be bullied, it looks like you’re going to have to pry Esther’s hawkishness from her cold dead talons.
“Congress anticipated tension when they designed the central bank, and they put firewalls in place so that the central bank could be independent and carry forth with its decision making.”
The possibility of a strongman president was also contemplated when the U.S. government was designed. Indeed, it was considered probable. Consequently, “they put firewalls in place.” They don’t seem to have worked.
Ironically, in virtually every Westminster-style system that failed to follow the founding fathers’ advice, a prime minister this unstable would have been unceremoniously knifed in the back by his own party ages ago, and then had his carcass tossed out the back door. So much for firewalls.