The desire for independence of the Fed

La volonté d'indépendance de la Fed

Photo: Karen Bleier Agence France-Presse
Donald Trump continues to take on the federal Reserve. Yet recently, he has provided another critical felt good saying that the Fed was its “main threat”.

One may ask whether the federal Reserve would have rather opted for a break at the end of the year, had not been the improper pressures of the american president. If the arbitration employment-inflation made up his mandate, the Fed also has a duty to defend its independence in the face of political considerations.

In September, so that it commanded a third increase of 25 basis points in its target rate this year, the Fed had the overheating of the u.s. economy and the risk of inflationary drift in its sights. A exceeding the neutral rate had even been mentioned, the your restrictive this inclination throwing a cold shower on the market. On Wednesday, the central bank’orchestrait rather a scenario of slowdown in the pace of growth in 2019 and contained inflation around its 2% target. Its chairman, Jerome Powell, had previously surprised the markets by talking about a recent target rate is approaching a neutral level, that is between 2.5 and 3 %.

A break would therefore have been felt on Wednesday, as the minutes of the meeting of 25 and 26 September was already showing a reluctance among the members of the monetary Committee. The Fed has preferred to play the scenario expected by adding 0.25 percentage points to its overnight rate on Wednesday, receiving a unanimous vote of the members of the monetary Committee. A willingness to demonstrate its independence in the face of attacks from the front repeated of the tenant of the White House, can you believe it.

Donald Trump does not cease, moreover, take it to the federal Reserve. Yet recently, the u.s. president offered another criticism felt good saying that the Fed was its ” main threat “, it would ” increase the rate too quickly and that she is too independent “. As to Jerome Powell, however, the choice of Donald Trump, ” I’m not happy with what he does “, he stressed. The institution responded with four rate hikes this year.

On the other hand, the frame rate will be reduced in 2019. This will no longer be three, but probably two increases that will come to mark the us economy next year. The central bank released the card to a deceleration of growth, with GDP growth reduced to 2.3% in 2019, against a surge of 3 per cent this year, boosted by the stimulus budget and tax Washington. And an inflation forecast lowered. Not to mention the trade war waged by the United States and China, and the tensions that Washington feeds with its main economic partners, the Fed speaks to the risk that external factors come to plague the american economy. Also, the slowdown in China and in many emerging countries, combined with the return of volatility in the equity markets, urges caution.

Jerome Powell could very well argue in turn that it has had to deal with the economic interventions rather poorly inspired by the u.s. president in the context of an economy already operating at its full potential, supported by a public debt that is fed to the steroids. He also had to remember on Wednesday that “political considerations play absolutely no role” in decisions of the institution over which he presides. But he feels the need to be more present next year, to accompany the end of each meeting of the monetary Committee and a press conference. The formula of these meetings had been privileged by a Ben Bernanke is willing to be as explanatory as possible in the context of the crisis of 2008. Janet Yellen, she had kept these meetings on a quarterly basis. Mr. Powell feels the need to communicate more. When you tweet daily ?

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