Trump Turns Fed Critics Into Fed Defenders

(Bloomberg Opinion) -- Faced with an attack by Donald Trump on one of their brethren, officials at the International Monetary Fund's annual meeting closed ranks. Elite policy makers’ defense of Federal Reserve Chairman Jerome Powell was certainly justified — though they also have a stake in the issue. The last thing any of them want are leaders poking too deeply into the monetary and regulatory arena. Don’t question the great god of central bank independence.

The IMF crowd wasn’t heaping praise on Powell before Trump said the Federal Open Market Committee had gone “loco.” The Fed's interest-rate increases have made life tough outside the U.S., especially in the developing world. The host of the IMF and World Bank meetings, Indonesia, has been especially vocal in saying so. Indonesia has followed the textbook in responding to the slide in the rupiah. The nation has raised interest rates, curbed imports and delayed some project spending.

Finance Minister Sri Mulyani Indrawati told Bloomberg Television that Americans need “to be very mindful that spillover from the effect of their policies is very real for many countries.” She went on to name names: “I do hope Jerome Powell, Mnuchin, China, Japan, Europe will be fully aware that you are in a country doing all the right things, yet we have to be very vigilant with the global environment changing very fast.”

Another top Indonesian minister, Thomas Lembong, said the dollar has too much sway: “The challenge today is not its dominance but its over-dominance.”

The first rule of Policy Club is: Don’t talk about Policy Club if you’re not a member of Policy Club. So the Indonesian ministers get a pass, but Trump does not.

The Fed is sympathetic to emerging markets and watching their travails carefully. It can help fellow central bankers by continuing to be transparent about its intentions. But the Fed’s mandate is to manage U.S. inflation and unemployment, not to manage the global economy.

So while central bankers are expressing outrage over Trump’s breach of central bank independence, they might quietly agree with the president. The flap is over etiquette, not substance.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Daniel Moss writes and edits articles on economics for Bloomberg Opinion. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.

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