Economists Speak their Minds after Trump Criticism of Yellen
Politicians accusing the Federal Reserve of artificially keeping interest rates low could undermine the independence of this important institution that is crucial to the economy functioning, according to a survey of economists.
The majority of economists, over 94%, believe that an independent central bank free of political interference, or being managed by other executive branches, performs better than those that work under political interference, according to the consensus results of a survey conducted by The Wall Street Journal. (Source: “Survey Says Political Attacks, Donations May Undermine Fed Independence,” The Wall Street Journal, October 14, 2016.)
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The survey was conducted after Republican presidential candidate Donald Trump repeatedly criticized the interest rate policy of the U.S. Federal Reserve, led by Janet Yellen, during his recent public rallies.
Yellen should be “ashamed,” Trump said in a CNBC interview last month, adding the Fed is not even close to being independent. By keeping interest rates low, the Fed has created a “false stock market,” he accused. (Source: “TRUMP: Janet Yellen should be ‘ashamed’ of what she’s doing to the country,” CNBC, September 12, 2016.)
Trump accused Yellen of helping the Democratic party candidate, Hillary Clinton, by pursuing a loose monetary policy despite the evidence that her move is creating asset bubbles in the stock market.
Yellen has denied this accusation by saying that her decision wasn’t driven by any political influence. The U.S. policymakers haven’t raised interest rates since last December as the world’s largest economy showed mixed economic results: the job market showed robust gains but GDP growth remained lower than expectations.
About 69% of economists said this political rhetoric involving the central bank could undermine its independence, but 70.6% of them also said campaign donations from Fed policymakers to politicians undermine the institution’s independence as well. (Source: Ibid.)
More than one-third of economists also said that if the next president asks Yellen to resign before her term is up in February 2018, she should do so.
Trump has said he would not reappoint Yellen if he is elected president, without clarifying whether he would ask her to resign.
