Economist Hubbard: Rate Hike Highly Likely in March

By The Fed FOXBusiness

Glenn Hubbard: Fed is handing off fiscal policy to Trump

Economist Glenn Hubbard discusses his outlook for the Fed.

Economist Glenn Hubbard, whose name has been bantered about as a potential successor to Janet Yellen as Federal Reserve Chair, discussed the outlook for Federal Reserve policy and the potential impact of President Trump on the Fed.

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Hubbard first responded to whether the Federal Reserve has become irrelevant due to President Trump and his proposed economic policies.

“We have over-relied on the Federal Reserve for some time because the government has not been functioning in fiscal policy.  President Trump has quite wisely said he will so that’s a big plus,” Hubbard told the FOX Business Network’s Stuart Varney.

On the other hand, according to Hubbard, the Fed will not be riding off into the sunset anytime soon.

“But I think it’s a mistake to write-off the Fed.  Come March, the Fed will be in the headlines.  We’re going to have better data, we’ll have another rate hike, we’ll have a budget out and there will be issues about inflation, about rates, about the dollar.  The Fed will be back.”

Hubbard explained that both the Fed and Trump will continue to have roles in the U.S. economy, but Trump will take the lead in driving policy.

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“But make no mistake about it, the Fed shouldn’t be the principal engine of discussion, it should be President Trump, it should be the government, that’s where policy should begin.”

Hubbard then reiterated that based on the economic data he expected an interest rate hike in March.

“I think it would be highly likely just based on the data.”

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But Hubbard did not see that as the big news, he saw the handoff in policy from the Fed to fiscal policy under Trump as the bigger deal.

“I think we’re definitely going to see a rate hike, but I don’t think that’s why there’s news.  There’s  news because I think we are seeing a normalization of policy and a handoff where it belongs to fiscal policy.”

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