Janet Yellen is in favor of this week’s assumed quarter-point rate cut from the Fed and she said as much at the Aspen Economic Strategy Group meeting in Colorado on Sunday.
“I think in light of the risks, I would be inclined to cut a bit”, she said at a kick-off event, adding that in her estimation, this isn’t the start of an easing cycle. “I wouldn’t see this as the beginning–unless things change–of a major easing cycle. But I do think it’s appropriate”, she said. Here’s the clip:
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“The United States isn’t an island. We’re part of the global economy. What happens in the rest of the world – in Europe, in Asia – affects the United States”, she said, after explaining that although the US economy is doing well, the rest of the world is clearly buckling under the weight of US trade policy.
Yellen spoke alongside Kevin Warsh, whose views on the proper role of the Fed differ a bit from Yellen’s and who, you might recall, was considered for her job in 2017 before Donald Trump ultimately gave the position to Jerome Powell.
“I give Ben [Bernanke] a ton of credit for putting together a team who frankly disagreed on some first principles on how the economy works, but all got along incredibly well”, Warsh said of the crisis. “Janet and I spent a ton of time together and I’d say we’re more fortunate than Chair Powell is this week”, he went on to quip, to sly giggles from Yellen and the crowd.
That wasn’t the only reference to Donald Trump. In fact, the whole event began with a series of remarks about economic development initiatives which culminated in expressions of solidarity with Baltimore amid the president’s weekend attacks on the city.
Asked specifically about her interview with Trump, Yellen weighed in at some length, explaining that Trump was curious about why it is that emerging market economies are growing so much faster than the US.
“I guess, I expressed some skepticism that [the US] would be able to achieve growth rates like [those of emerging markets]”, Yellen recalled.
Trump is finding out how difficult it is to engineer EM-like growth in an advanced economy. On Friday, the updated figures from the BEA showed GDP expanded 2.5% on a Q4-over-Q4 basis last year. In other words, Trump did not hit his 3% goal in 2018 and likely won’t this year either.
Yellen continued. “We had kind of an interesting discussion about kind of how the Federal Reserve works and how we make decisions and what the role of the Chair is”, she went on to say of her conversation with Trump. The implication was that Trump wanted to know how much power the Chair had over the rest of the members.
For his part, Warsh wouldn’t comment on his interview with the president other than to allude to previous reporting that Trump told him in person that he (Kevin) was “a very good looking man”.
In February, asked by Marketplace’s Kai Ryssdal if she thinks “the president has a grasp of macroeconomic policy”, Yellen said simply “No, I do not”.
