In the chaotic windup of the presidential race, Donald Trump complained that Janet Yellen's Federal Reserve was being "obviously political" in keeping interest rates ultra-low. He spoke of a "big fat ugly bubble" fueled by the Fed. And he grumbled that savers were getting "creamed" by low rates.
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Since then, the Fed has raised rates, and more hikes are expected. But now, some Fed watchers wonder if Trump will soon discover something many of his White House predecessors found:
Low rates can be a president's best friend.
That may be especially true when you have an economic plan as audacious as what Trump has pledged: A much faster economy, with many more exports, fewer imports, a rejuvenated manufacturing sector and 25 million more jobs over 10 years.
"I have never yet seen a president who wanted interest rates to go up," said economist David Wyss, a former Fed staffer who teaches at Brown University. "I don't think President Trump will be an exception."
The kind of loose credit that the Fed engineered over the past eight years tends to provide economic fuel. By contrast, higher rates typically slow growth. For Trump, higher rates would probably also boost the dollar's value, thereby making U.S. goods pricier overseas and impeding his efforts to narrow the trade gap.
To smooth the way for his economic plan, the president might decide to drop the grievances he's lobbed at Yellen's Fed and hope its policies don't undermine the tax cuts, deregulation and infrastructure spending he wants to push through.
"Trump's advisers are mindful of the Fed's impact on the U.S. dollar and the ability of American companies to export," said Brian Bethune, an economics professor at Tufts University. "They are going to tell Mr. Trump that the Fed is doing a good job by not raising interest rates too quickly."
The new president will have a rare opportunity to put his stamp on the Fed in the coming year or two. He can immediately fill two vacancies on the Fed's seven-member board, as well as choose someone for the influential role of vice chair of supervision.
In addition, Yellen's term as chair will end in February next year, and Stanley Fischer's term as vice chair ends in June next year. Trump could replace both with more like-minded policymakers. Or he could surprise everyone by asking Yellen, with her go-slow approach to rate hikes, to remain Fed chair for another four-year term.
Under Yellen, the Fed has been cautious about raising rates as the economy has improved steadily but slowly since the Great Recession. After keeping its benchmark short-term rate near zero for eight years, the Fed raised it modestly in December 2015. It waited a full year before raising it again last month to a still-low level.
Yellen and the Fed have said they envision three rate increases this year — though not likely at their latest meeting this week — and only a gradual pace beyond that if the economy progresses as expected. In a speech this month, Yellen said the economy is "near maximum employment." The unemployment rate is a low 4.7 percent, far below the 10 percent it hit in 2009, and inflation is edging near the Fed's 2 percent target.
Will the Fed's policymaking satisfy Trump? Economists suggest that the answer depends on how well he succeeds in getting his economic program through Congress and how investors respond to it.
Since Trump's election victory, Wall Street has been on a tear, with the Dow Jones industrial average hitting records and surpassing 20,000 for the first time. Investors have focused on the potential benefits of Trump's economic plan rather than on any possible slowdown caused by Fed rate hikes.
Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, says an incremental pace of rate hikes shouldn't cause much drag on economic growth given that rates remain at such low levels. Yet he added a cautionary note:
"President Trump has to realize that if he gets his fiscal stimulus program through Congress, the Fed cannot keep monetary policy as easy as it has been or it could create inflation troubles down the road," Sohn said.
Trump hasn't said whom he might consider for Fed vacancies or whether he'll tilt toward officials more inclined to raise rates to prevent high inflation or financial bubbles or instead those who, like Yellen, favor keeping rates low to maximize employment.
But among those being mentioned is John Taylor, a Stanford University economics professor and author of the so-called Taylor rule, which would direct the Fed to adhere to a rough formula in its rate policy. Another is Glenn Hubbard, dean of the Columbia University School of Business, who led the Council of Economic Advisers in George W. Bush's administration.
Other possible nominees for Fed board positions include Kevin Warsh, who was a board member during the 2008 financial crisis, and David Nason, who was a top Treasury official then. Nason is being mentioned for vice chairman for supervision, a role now handled by Daniel Tarullo, whom many in the banking industry see as too zealous on regulation. Trump must also decide whether to support Republican efforts to lessen the Fed's independence, in part by subjecting it to more intensive audits.
Perhaps the biggest wild card is whether Trump might ask Yellen to serve a second term, with the goal of maintaining an incremental path to rate hikes. It's an improbable prospect given Trump's remark during the campaign that Yellen should be "ashamed" of keeping rates so low — in order, Trump charged, to keep stocks artificially high.
But it isn't impossible.
"I think the odds that she will be re-nominated are less than even, but you can't rule it out," said Mark Zandi, chief economist at Moody's Analytics. "If the economy is struggling a bit, Trump may decide he needs someone who is going to keep rates lower for longer."