Trump’s Attacks Could Have ‘Subtle Effects’ on Fed, Fischer Says

(Bloomberg) -- President Donald Trump could have “subtle effects” on Federal Reserve policy makers with his complaints about their interest-rate increases but he won’t get them to call off their credit tightening campaign, former Fed Vice Chairman Stanley Fischer said.

“If somebody is pushing on you every day, it may affect you,” Fischer said in an interview with BNN Bloomberg on Wednesday. “But it won’t be, ‘you shouldn’t raise the interest rate’ and they don’t raise the interest rate. That won’t happen.”

Breaking with decades of presidential precedent, Trump has openly and repeatedly criticized the Fed in recent months for increasing rates. His latest salvo came on Sept. 26, just hours after Fed Chairman Jerome Powell and his colleagues boosted rates for the third time this year.

Powell, whom Trump picked for the top Fed job earlier this year to replace Janet Yellen, has responded to the president’s attacks by saying that the Fed was “focused exclusively” on its mandate to pursue full employment and stable prices. “We don’t consider political factors,” he told reporters last week.

Fischer, who is considered a doyen in global policy making circles after stints at the International Monetary Fund, the Bank of Israel and the Fed, said the Trump administration had made good appointments to the U.S. central bank.

“The Fed board is very high quality,” the 74-year-old Fischer said, adding, “I don’t think they’re going to say, ‘oh, yeah, whatever you say boss’ in response to the president’s dictums.”

Besides Powell, Trump has also named former private-equity executive Randal Quarles and monetary policy expert Richard Clarida to the board. Two of his other nominees, former Fed official Marvin Goodfriend and state banking commissioner Michelle Bowman, have yet to be confirmed by the Senate.

Fischer declined to take issue with the Fed’s current strategy of gradually raising rates when asked if the central bank should be moving faster. “I’m inclined to take the recommendations of the thousands of people who work at the Fed seriously, because they’re good,” he said.

He did, though, voice concern about moves to roll back some of the regulations and other protections put in place to make the financial system safer after the crisis a decade ago.

“We’re already going back from that framework and easing up on it,” he said.

If that trend goes too far, it will lead to another crisis, Fischer said, though he added, “We’re not there yet.”

To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Ben Holland

©2018 Bloomberg L.P.