Republican presidential nominee Donald Trump on Monday accused the Federal Reserve of keeping interest rates low for political reasons, the latest in a string of often contradictory critiques of the nation’s central bank.
The Fed vehemently defends the setting of its influential interest rate as independent of political considerations — a principle that is considered fundamental not only to the Fed but for central banks around the world. Yet speaking on CNBC, Trump said Fed Chair Janet L. Yellen should be “ashamed” of keeping interest rates so low for so long.
“She’s obviously political and doing what Obama wants her to do, and I know that’s not supposed to be the way it is,” Trump said.
The Fed typically lowers interest rates to encourage businesses and consumers to borrow money and spend it, boosting growth. Raising rates makes saving more attractive and helps rein in an overheating economy.
Minneapolis Fed President Neel Kashkari — a Republican who ran for governor of California — rebutted Trump’s accusation on Monday.
"Politics simply does not come up," Kashkari said on CNBC.
Trump’s remarks follow an interview with Reuters last week in which he blamed the Fed for creating a “false economy” and an “artificial stock market.” But the businessman and former reality TV star has given conflicting assessments of the costs and benefits of low interest rates over the course of his campaign.
Just this spring, Trump told Fortune that low interest rates were “the best thing we have going for us” and said any increase could be “scary.” And Trump told CNBC in May that a rate hike could cause a “major problem,” particularly if the U.S. dollar strengthened considerably.
Trump’s attitude toward Yellen has also appeared to shift. In addition to questioning her motives on Monday, Trump has said multiple times that he would consider replacing her once elected to the White House. The leader of the Fed is a presidential appointee, and Yellen’s term ends in 2018.
In May, Trump said on CNBC that he had “nothing against” Yellen and called her a “capable person.” Though he noted that she is a Democrat and unlikely to be reappointed by him, he suggested that he supported her leadership.
“She is a low-interest-rate person, she’s always been a low-interest-rate person, and let’s be honest, I’m a low-interest-rate person,” Trump said.
But on Monday, he was on the attack.
“She’s keeping [rates] artificially low to get Obama retired,” he told CNBC. “Watch what is going to happen afterwards. It is a very serious problem … and to a certain extent, I think she should be ashamed of herself.”
The Fed has been under intense scrutiny since the 2008 financial crisis, when it bailed out flailing banks and slashed its benchmark rate to zero. Since then, rates have barely budged and the central bank has pumped trillions of dollars into the recovery in a bid to boost growth.
Their efforts have had mixed results. Trump's comments reflect arguments from both sides of the political spectrum that the Fed's stimulus has primarily boosted stock markets rather than ordinary Americans. Though hiring is strong and the unemployment rate is half of its peak following the downturn, the gains have been uneven and broader economic growth remains disappointing. The Fed argues that fixing those problems is the responsibility of lawmakers in Washington, however, and it is considering whether to continue removing its support for the economy — not to add more.
“There are a lot of arguments you can have about the Fed’s monetary policy — legitimate, serious debates,” said Tony Fratto, a partner at Hamilton Place Strategies and a former spokesman for President George W. Bush. “To me, the idea that it’s motivated by politics is absolutely absurd.”
Central bank officials are slated to meet in Washington next week, and investors have become increasingly nervous about the possibility of a rate hike. Last month, Yellen said the case for higher rates had “strengthened” but emphasized future increases are likely to be gradual and will depend on the evolution of the economy.
Democratic nominee Hillary Clinton has been relatively quiet about Fed. She supported banning bankers from the boards of directors at the Fed’s regional branches, but Clinton has not weighed in on the Fed’s interest rate decisions — and told reporters last week that doing so is inappropriate.
"You should not be commenting on Fed actions when you are either running for president or you are president," Clinton said. "Words have consequences. Words move markets. Words can be misinterpreted."