The novelty of Donald Trump’s Fed tweets wore off a long time ago.
Nobody is surprised by Trump’s brazen assault on Fed independence anymore, nor is anyone particularly amused by the president’s pretensions to monetary policy expertise, as absurd as they most assuredly are.
It’s not that Trump isn’t occasionally right. It’s just that the audacity on full display when he weighs in (and he weighs in a lot) is astounding and, occasionally, wholly unnerving.
For example, his derisive references to Fed officials as “boneheads” who “love” seeing US manufacturers suffer and the inflammatory contention that Jerome Powell is an even greater “enemy” of American prosperity than the Chinese Communist party, aren’t welcome. Neither are his habitual allusions to the Fed board being part of a deep state conspiracy to overthrow his administration.
Amusingly, his 2019 tweets that mention “Federal Reserve” and “Powell” form a bell curve, of sorts (see the visual above). Note that the chart does not capture all references to monetary policy. Parsing his feed for “Fed” is complicated by the president’s use of other words which start with the letters “f-e-d” and it also doesn’t necessarily capture all of his exhortations to lower rates.
“Trump has tweeted about the Fed and interest rates 56 times this year, versus just five times in 2018”, the Wall Street Journal’s Nick Timiraos remarked on Tuesday, before reminding Trump that “the Fed has indicated that after cutting rates three times this year, they are very unlikely to cut again unless the economic outlook gets much darker”.
Why the reminder? Well, because Trump was back at it.
“Would be sooo great if the Fed would further lower interest rates and quantitative ease”, he said, in a morning tweet, adding that “the Dollar is very strong against other currencies and there is almost no inflation”.
Apparently, Trump is buying the notion that the Fed’s T-bill purchases don’t amount to QE4.
We jest – sort of. Trump has doubtlessly been briefed on the Fed’s purchases of bills for reserve management purposes. After all, he’s spent the last year variously maligning the Fed’s balance sheet runoff, which was one of the causes for the September repo squeeze. That squeeze necessitated the onset of “organic” balance sheet expansion.
Seen in that light, it’s actually surprising Trump hasn’t seized on the repo issue to insist on coupon purchases (i.e., QE “proper”).
Trump continued on Tuesday, advising Powell that when it comes to more easing “This is the time to do it.” Exports, the president assessed, “would zoom!”
For what it’s worth, the dollar has been at least temporarily “tamed” by Fed cuts, albeit on what must have been a frustrating lag for Trump.
This is one situation where he’s actually not wrong – the US is at risk of importing disinflation through the classic FX channel.
But just as likely as not, Trump is looking out for his own self interest. After all, we’re entering an election year.
It’s probably just a matter of time before he adopts one of the “best” Erdogan-isms. The Turkish autocrat – who has longed railed against a purported cabal of conspirators bent on keeping rates too high – is fond of ascribing a sense of purpose to interest rates.
They are, Erdogan says, “the mother and father of all evil”.