President Donald Trump has publicly and harshly rebuked Jay Powell, the chairman of the US Federal Reserve, for what he regards as misguided increases in interest rates that threaten continued economic expansion. As with much of what Mr Trump says and does, his way of doing business is counterproductive, irrespective of whatever merit his underlying position may have.
No self-respecting central banker can be seen as yielding to pressure from a politician facing a difficult re-election. A central bank that appears to be subservient to political concerns will rapidly lose credibility in the markets, resulting in increases in inflation expectations and rising long-term rates of interest
. As we at the US Treasury used to remind White House political staff during the Clinton administration: “Fed bashing is a fool’s game.”