Federal Reserve officials should slow the pace of interest-rate hikes and consider President Donald Trump’s criticism of their tightening campaign as “background noise,” according to former Fed Gov. Lawrence Lindsey.
“The best way to think about the president is as background noise, and that’s the way the Fed should think about it, and they should focus on the facts,” Lindsey said in an interview Thursday on Bloomberg Television. “And the facts are, with inflation below their target and falling, and financial markets having some stresses — not just here but around the world — that it’s not such a great idea to go fast anymore.’’
Fed Chairman Jerome Powell has come under a barrage of criticism from Trump in recent months for a series of rate hikes aimed at preventing the U.S. economy from overheating. Though the unemployment rate of 3.7% is the lowest since 1969, the Fed is undershooting its 2% inflation target.
The administration’s barbs have sharpened in recent weeks, as stocks head for their worst year since 2008. The U.S. central bank has raised interest rates nine times in the past three years.
“The Fed is not supposed to slow down the economy, and it’s not supposed to raise rates because too many people are working,’’ said Lindsey, the president and chief executive of Lindsey Group, a Fairfax, Va.-based consultancy. “It’s only supposed to do it in case of inflation, and right now we don’t have inflation.”
Lindsey, a Fed governor from 1991 to 1997, said a fair question for the policy-setting Federal Open Market Committee is what will it do when the economic data change.
“The facts have changed: Inflation is coming down and there are real stresses in the financial markets,” he said. “They’re getting a loud signal from the markets that you’re doing too much too fast.”
