Former Federal Reserve Board Chair Janet Yellen is critical of President Trump’s attacks on her successor, Jerome Powell, over the Fed’s interest rate policy, and said the president has no business threatening to kick Powell out of office.
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"I don’t believe that it’s legal for the president to fire the Fed chair," she told FOX Business' Jon Hilsenrath on "WSJ at Large". "Both the governors -- the seven governors of the Fed -- and separately the chair and vice-chair, have term appointments that are Senate-confirmed and can only be removed for cause."
I don’t believe that it’s legal for the president to fire the Fed chair.
Yellen believes Powell has handled the president’s threats well.
"I would do the same thing that Chair Powell has indicated," she said. "Chair Powell has said that he would not be willing to resign if he were asked to. I would certainly insist, as Chair Powell has, that I would serve my term out."
In light of the president’s comments, Yellen-- who led the Fed from 2014 to 2018-- joined her three predecessors in penning an op-ed piece in the Wall Street Journal this month insisting on the importance of the Fed being free of political interference.
"We’re concerned that Fed independence is under threat," she said. "And all of us feel very strongly that in terms of the U.S. economy performing well and the Fed being able to play the most constructive possible role in ensuring that happens, it’s very important that the Fed be able to make decisions in an independent way that’s not colored by politics or political pressure."
We’re concerned that Fed independence is under threat.
Yellen says President Trump doesn’t share that view.
"I think he’s made clear in various interviews and tweets that he doesn’t believe that the Fed should be independent and extolled the situation he sees in China and other countries where central banks are not independent," she said. "And you know, independence is something that central banks around the entire world have been granted by their legislatures because it’s widely appreciated that economic performance is best when the central bank is allowed to act independently."
Economic performance is best when the central bank is allowed to act independently.
And Yellen believes the Fed has always been the epitome of independence.
"I have a lot of experience working with that committee," she said. "It’s a diverse group that engages in a robust debate that’s never been political. There are transcripts of all the meetings that have occurred in history. And I think it's pretty clear from reading those transcripts that politics doesn't enter that room. And that's a tradition that is important to maintaining the Fed’s apolitical -- non-political decision-making. I think Chair Powell is ignoring the pressure that he's receiving from the president."
I think Chair Powell is ignoring the pressure that he's receiving from the president.
Still, Yellen knows it’s hard to escape the impression the president’s comments could be influencing policymakers.
"It means that market participants -- every time there's a decision or a tweet -- will always be speculating what role politics played," she said.