Former Federal Reserve Vice Chairman Stanley Fischer on Thursday joined the chorus of voices warning about central bank independence in wake of President Donald Trump’s frequent and withering criticism.
“If they lose their reputation for independence, monetary policy becomes a mess,” he said. In an CNBC interview, Fischer pointed out that the risk of Trump’s frequent chiding isn’t simply that the Fed will slow the pace of planned interest-rate hikes meant to normalize post-crisis policy. There’s also risk that the Fed may respond with higher-than-necessary rates.
‘Their profession requires them to be professional. They don’t want to be regarded as the guys who folded. And they shouldn’t be regarded as the guys who exaggerated in order to prove they weren’t folding. And I don’t think they will.’
Fischer generally seemed supportive of the Fed’s stance.
“It looks very good from outside, you seem to be doing the right thing,” Fischer said when asked if he had a message for Fed Chairman Jerome Powell, as he said he doesn’t call his former colleagues. “I can’t really tell, but that’s my current guess.”
Fischer sounded concerned about growing trade tension, with China in particular, though he pointed out the U.S. has compromised on other trade disputes such as renegotiating NAFTA.
“So the big question is, are they saving up the non-compromising actions for China, or is that going to be like the ones we’ve had so far?”
The current 10% tariff rate on roughly $200 billion of Chinese goods is slated to escalate to 25% next year in the absence of an agreement. The Trump administration also has said it’s looking to impose tariffs of another $267 billion of Chinese goods.