President Trump has been a vocal critic of Federal Reserve Chairman Jerome Powell’s approach on interest rate hikes, but House Financial Services Committee Chair Jeb Hensarling, R-Texas, said Powell is “generally” doing a good job.
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While past presidents have historically steered clear of criticizing the Fed, because its independence has been seen as important for economic stability, in October Trump launched an assault on the Fed, saying that it is his “biggest threat” because it is “raising rates too fast, and it’s too independent.”
Powell, Trump’s own nominee to replace Janet Yellen, sat on the Board of Governors during the era of quantitative easing and fiscal austerity. Although his job is “difficult,” in Hensarling’s opinion, the Fed should be subject to “examination” and “criticism” as long as the central bank is ultimately calling the shots.
“They write their own budgets so they’re not wallflowers, they ought to be able to take a little criticism,” Hensarling said on FOX Business’ “Mornings with Maria” on Friday.
“Frankly the Fed ought to be listening not only to the president, they ought to be listening to a lot of people,” he added. “They do not have a monopoly on smart Ph.D. economists’ number one. And independence at the Fed and Congressional oversight and accountability, those are not mutually exclusive concepts.”
The November jobs report released on Friday showed U.S. unemployment remains at 3.7 percent, the lowest level in nearly 50 years despite missing expectations on jobs creation. The report comes on the heels of the Fed signaling it would raise borrowing costs again in December — a concern for Hensarling who says the U.S. is “probably” approaching the neutral rate, which neither stimulates nor cools the economy.
“I do believe that we need to come to a neutral rate. I think the footprint of the Fed is much too large in the economy,” he said. “We can quibble over are we there yet? Are we almost there yet? Personally the data I’ve seen — I believe we’re either there or we’re almost there.”
The Fed raised interest rates three times this year. It raises interest rates to prevent the economy from growing too fast and as a result causing inflation.
The Fed’s next two-day policy meeting is set to take place in mid-December.