After a fusillade of excoriating and in many ways unprecedented attacks on the Federal Reserve by the Republican presidential candidate, Janet Yellen, the US central bank’s chair, finally hit back.
Ms Yellen last Wednesday dismissed as emphatically wrong Donald Trump’s claims that she and her institution were keeping short-term interest rates low at the behest of the Obama administration. ‘Partisan politics play no role in our decisions,’ she declared.
Mr Trump is throwing punches at a time when the US central bank is under assault from both sides of the partisan divide, and at a time when polling suggests public confidence in its leadership has declined during a subpar economic recovery.
Some experts say the Fed is vulnerable and that the populist attacks could fuel demands by politicians for tighter constraints on its policy freedoms. Mr Trump ‘is tossing a lot of fuel on the fire’, says Sarah Binder, a professor of political science at George Washington University. ‘It intensifies the partisan criticism of the Fed and keeps the Fed in the politicians’ crosshairs.’ Mr Trump’s interventions by no means mark the first time the Fed has been turned into a political punching bag. Previous Fed chairs have been the subject of barbs during presidential campaigns – including in 2011 when Republican candidate Rick Perry accused former Fed chair Ben Bernanke of ‘treasonous’ behaviour by conducting quantitative easing. Past administrations have seen outbreaks of tension with Fed chiefs, including under presidents George HW Bush and Richard Nixon.
This post was published at David Stockmans Contra Corner on September 28, 2016.