Monday, November 14, 2016

Trump vs. the Fed: War or détente?

In many ways, Donald Trump is an economic enigma. Candidate Trump has in the past advocated wildly contradictory positions on the campaign trail. Sometime the market is left not knowing what to think.

One little discussed topic but important topic is Trump's relationship with the Federal Reserve. What kind of Fed would he like to see?

Candidate Trump assailed the Fed in September 2016 for keep rates too low (via Reuters):
Republican presidential nominee Donald Trump, who has previously accused the Federal Reserve of keeping interest rates low to help President Barack Obama, said on Monday that the U.S. central bank has created a “false economy” and that interest rates should change.

“They’re keeping the rates down so that everything else doesn’t go down,” Trump said in response to a reporter’s request to address a potential rate hike by the Federal Reserve in September. “We have a very false economy,” he said.

“At some point the rates are going to have to change,” Trump, who was campaigning in Ohio on Monday, added. “The only thing that is strong is the artificial stock market,” he said.
An easy monetary policy helped the incumbent party by stimulating growth. When he becomes President Trump in January, does he still want the Fed to take a more hawkish approach to monetary policy?

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