Fed Nominee Moore Calls December’s Rate Hike a ‘Substantial Mistake’

(Bloomberg) -- Federal Reserve nominee Stephen Moore called the Fed’s December interest-rate hike “a very substantial mistake” while adding that he looks forward to working with Chairman Jerome Powell to help ensure the U.S. economy continues to expand.

“Everyone would now acknowledge that what they did in December with the rate increase -- it was a very substantial mistake,” Moore said in an interview Friday with Bloomberg Television. Asked about whether a rate cut is needed, he said “I’m not sure about that -- I’d have to take a closer look at it.”

Hours earlier, President Donald Trump announced plans to nominate Moore for one of two vacancies on the Fed’s seven-seat board, confirming an earlier Bloomberg News report. The president later said in a tweet that Moore is “a very respected economist” and said he has “no doubt he will be an outstanding choice.” Nominees for the job are subject to Senate confirmation.

Moore, an economist at the conservative Heritage Foundation, said in the interview that he and Trump “think a lot alike” when it comes to economics. “I really believe we can have 3 to 4 percent growth for next five to six years.”

Fed officials on Wednesday penciled in a long-term growth estimate of 1.9 percent for the U.S. economy.

“I don’t want to be a disruptor,” Moore said. “I want to be somebody who can really help Chairman Powell and the others on that board to construct to the best pro-growth, stable price system that we can for this country.”

In a radio interview in December, Moore said that Powell and others members of the Fed board “should be thrown out for economic malpractice’’ after raising rates that month.

Speaking to Bloomberg on Friday, Moore said that comment was probably made “in anger’’ and he repeatedly emphasized his willingness to work with and learn from policy makers and officials at the Fed.

He argued that Trump’s policies had created a global demand for dollars by increasing the attractiveness of the U.S. as a place for investment and said the Fed had worked at cross purposes to that by tightening credit and withdrawing money from the economy.

Deflation Worries

As a result, “I’m worried more on the deflation side right now than the inflation side,’’ he said, pointing in particular to a broad-based fall in commodity prices in recent months.

The Fed nominee said the U.S. economy is being weighed down by a slowdown in global growth.

“The Fed should be paying very close attention to what’s happening globally,’’ he said. “We want to see global growth because we can’t carry the whole world economy on our shoulders.”

A past critic of the Fed’s bond purchase programs, called quantitative easing, Moore said he would reserve judgment about what the central bank should do with its $3.9 trillion balance sheet. “I’m going have study up’’ on that, he said.

But he added, “over time obviously we want to reduce that balance sheet and not have these massive amounts of debt.’’

The central bank, which has been gradually shrinking the balance sheet, said this week that it would end its drawdown of its bond holdings in September.

--With assistance from Michael McKee and Scarlet Fu.

To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net;Rich Miller in Washington at rmiller28@bloomberg.net

To contact the editors responsible for this story: Alister Bull at abull7@bloomberg.net, Brendan Murray

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