We hear constantly about the importance of the independence of the Federal Reserve. Fine: but what if the Fed isn’t independent of politics, it is just independent of, and hostile to, the administration that is in power?
Some think that is the situation now before us. Stephen Moore comments on Fed Chairman Jerome Powell’s most recent pronouncements:
Fed Chairman Jerome Powell was full of doom and gloom yesterday [Wednesday], forecasting 1.6% growth for this year and closer to 1.5% next year.
Was he talking about Afghanistan or the United States?
In the second quarter of this year, the U.S. economy grew by 3.3%, and with a few weeks to go in the third quarter, the Federal Reserve Bank of Atlanta is forecasting above 3% growth – twice Powell’s anemic rate.
Why is Powell so pessimistic?
Powell never mentioned that real household incomes are up $1,100 for the first seven months of 2025.
He attacks Trump’s tariffs and more restrictive immigration policies as restricting growth – and he’s right on that. But he never mentions the Trump tax cut, the immediate expensing for capital purchases (which has spurred an investment boom), the deregulations that could save up to $1 trillion this year, or that Trump’s pro-energy policies have increased U.S. production of oil and gas to record highs, or that the area where job growth is way down is in government employment – which is GOOD for the economy.
So Powell is hostile to the administration’s economic agenda, and–perhaps–has positioned the Fed in opposition to it.
There’s also something almost comical of a Fed chair who let inflation soar by 21% and promised it was all “transitory” now terrified of an inflation rate of less than 3% this year.
Again: is Powell actually independent, or is he just on the other side?
Moore concludes:
The Fed should be independent, yes. But it should also be competent and accountable. Under Powell’s reign of error, the central bank has been neither. The end can’t come soon enough.
Larry Kudlow makes some of the same points, but takes the argument a little further:
[T]he Jay Powell Fed expects the economy to grow by only 1.6 percent this year, 1.8 percent next year, and 1.9 percent the year after.
While the central bank’s policymakers did raise their GDP projections slightly, their numbers basically say: We at the Fed don’t believe Trump policies.
The Fed’s inflation numbers go from 3 percent down to 2 percent over the next three years. And that’s okay.
But the gap between Mr. Trump’s economy, which he expects to grow by 3 percent to 4 percent, and the Fed’s view of less than 2 percent, is troublesome.
And it suggests that the central bank opposes the president’s policies.
This is not good.
It’s one of many reasons why Mr. Powell should’ve resigned months ago.
Powell also should have asked for the resignation of mortgage fraudster Lisa Cook.
Meanwhile, Mr. Powell’s mismanagement of the Federal Reserve is beyond the pale.
In recent years, the central bank lost nearly $200 billion from a mismatch of their assets and liabilities.
The money managers at the Federal Reserve Bank of New York are losing money on a daily basis. They have been paying banks 4.5 percent, but their portfolio generates only 2.5 percent.
Meanwhile, the Fed’s bond portfolio is completely under water, with some estimating its losses at $250 billion.
Then, of course, there is the Fed’s Taj Majal, construction of which I believe President Trump has stopped. But that is a minor point, compared to the possibility that the Chairman of the Federal Reserve is actively trying to undermine America’s economic policies. That isn’t independence, it is partisanship.
Happily, Powell’s reign will end soon:
folks should cheer that interest rates are headed lower.
And they should also cheer that in a few months Mr. Trump will appoint his own Fed chairman, to help him achieve his splendid economic growth policies.
