Former New York Federal Reserve President Bill Dudley tried to clarify his call last week for policymakers at the U.S. central bank to take overt political action in order to undermine President Trump and thwart his 2020 re-election efforts.
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Writing in an op-ed for Bloomberg News, Dudley said that conducting monetary policy — with the intent of influencing the outcome of the upcoming presidential election — does not fall within the Fed’s purview and that he was “trying to be provocative” by arguing otherwise last week.
“I was not suggesting that the Fed should do so regardless of the consequences for the economy or that it should stand by and allow a recession,” he wrote. “And I was not trying to suggest that the Fed should take sides in the upcoming election.”
In a separate Bloomberg News op-ed (“The Fed Shouldn’t Enable Donald Trump”) published last week, Dudley suggested policymakers should refuse to play along with the U.S.-China trade war, and its economic fallout, by withholding cutting interest rates further to make it “abundantly clear that Trump will own the consequences of his actions.”
“Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election,” Dudley wrote. “There’s even an argument that the election itself falls within the Fed’s purview.”
The Fed disavowed Dudley’s comments.
Dudley’s original op-ed generated outrage, largely across the board, with experts arguing it could cause “immediate and serious damage to one of America’s key political institutions.”
It also prompted North Carolina Republican Sen. Thom Tillis, a member of the Senate Banking Committee, to call for an investigation into the Fed’s independence.
However, Dudley walked back some of the comments on Wednesday, instead saying that policymakers should “never be motivated by political considerations,” and that doing so would be detrimental to not only the perception of the central bank, but also to its interests.
But Dudley continued to blame Trump, who has repeatedly attacked Powell and the central bank for not aggressively cutting interest rates while blaming them for wild market fluctuations, for politicizing the Fed.
“I don’t think the Fed should be attacked for the economy’s performance when the president’s own actions are creating the downside risks,” he wrote. “In my view, President Trump’s persistent attacks on the Fed have politicized the central bank. People now wonder whether the president’s attacks are influencing the Fed’s decisions.”