Donald Trump is highly distressed at what he on Monday described as a “horrendous lack of vision by Jay Powell and the Fed”.
By “lack of vision”, the president of course means the good folks conducing US monetary policy don’t necessarily think it’s a great idea to cut rates to zero and restart large-scale asset purchases when the economy is growing at a 2.1% annualized clip and the unemployment rate is parked at a five-decade nadir.
The reason officials think that kind of overtly pro-cyclical policy lean might be dangerous is precisely because it is right out of the banana republic playbook, a characterization which becomes even more apt when you note that the country is run by a would-be strongman who recently deployed debt-funded fiscal stimulus in an effort to overheat the economy.
Of course, Trump is doing everything he can to give the Fed some plausible deniability when it comes to cutting rates aggressively even as the domestic economic picture remains generally upbeat. Specifically, the president is doubling and tripling down on his trademark schizophrenia when it comes to trade policy and that, in turn, is creating unprecedented levels of uncertainty.
Just ask the June FOMC minutes (or just ask Beijing).
For many on the Fed, that’s more than enough to justify a rate cut or two (or three), but Esther George and Eric Rosengren weren’t convinced in July, and for his part, Rosengren isn’t convinced now either.
“I just want to see evidence that weâ€™re actually going into something thatâ€™s more of a slowdown”, the Boston Fed chief told Bloomberg’s Kathleen Hays on Monday, adding that “just because other countries are weak, if weâ€™re strong it doesnâ€™t mean we should [cut rates]”.
In other words, he’s going to dissent again in September.
If Powell is a man who suffers from “a horrendous lack of vision” in Trump’s estimation, then one can only imagine what the president thinks about Rosengren, who added insult to injury when he told Hays that “we have to be careful not to ease too much when we donâ€™t have significant problems”.
Generally speaking, we would agree.
That said, the US does, arguably, have at least one “significant problem” and he’s been binge-tweeting about the Fed for nine months straight.