Fed's Dudley Says Trade Barriers Are a 'dead End' For Economy

Trade protectionism is a "dead end" used for political capital but ultimately dangerous for the U.S. economy, New York Federal Reserve President William Dudley said Thursday in India, according to a report on Reuters. Dudley did not mention President Donald Trump by name in a speech at the Bombay Stock Exchange, but used the address to approach territory sometimes avoided by Fed members: fiscal policy. "Protectionism can have a siren-like appeal," said Dudley. "Viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term," he said in prepared remarks reported by Reuters. "Viewed more broadly, it would almost certainly be destructive to the economy overall in the long term." The Fed is independent, but answerable to Congress. Its governors are appointed by the White House and confirmed by the Senate. Barriers to trade are very costly, Dudley said, because they blunt export opportunities, make consumer goods more expensive, and they can often "backfire" by harming workers who can no longer compete in a global economy. "There are many approaches to dealing with the costs of globalization, but protectionism is a dead end," he said. Dudley did not address monetary policy in the speech. The Fed next meets to take up interest rates in June and financial markets widely expect a hike to the Fed funds rate at that time.