Econometer: Is Trump’s Criticism Of The Fed Fair?

Oct. 19--President Donald Trump has criticized the Federal Reserve for raising its benchmark interest rates for the third time this year. He said the Fed is moving too fast and did not want the economy to slow.

Question: Is the Federal Reserve being too aggressive in raising rates?

Phil Blair, Manpower

NO: We have to trust that they are the experts and are doing what is right, long term, for the economy.

Kelly Cunningham, San Diego Institute for Economic Research

NO: The Fed was irresponsible to lower interest rates far too low for far too long. Accommodative monetary policies creating artificially low interest rates and money-printing stoked too much debt reaccumulating. The result is continual massive buildup of government, personal and corporate debt. Rising interest rates should have been garnered much sooner and faster to forestall the large bubble from expanding. The resulting necessary correction is therefore much more needed and will be much more severe.

David Ely, San Diego State University

NO: The target federal funds rate is currently 2 -- 2.25, low relative to historical norms. Despite the rate increases since 2015, the stance of monetary policy is still accommodative. With a low unemployment rate and strong economic growth, the Fed can make a strong case for raising rates. Also, if rates have moved to more normal levels by the start of the next recession, the Federal Reserve will be better positioned to respond.

Gina Champion-Cain, American National Investments

NO: The Federal Reserve's measured approach to normalizing rates has been and continues to be "Goldilocks, just right." The post crisis period marked by massive spending and effectively zero rate money may have lulled some of us into a belief that "free money" was here to stay. Not so. The Fed's strategy for allowing steady growth while keeping inflation in check has performed well and can in no way be characterized as aggressive.

Alan Gin, University of San Diego

NO: With the economy at full employment, now is the time for the Federal Reserve to be increasing interest rates. That will slow the economy down some and prevent overheating, which could lead to inflationary pressure. More importantly, it will give the Fed some cushion to cut the interest rate in the future if the economy dips into a recession. There was some worry when rates were at record lows that the Fed couldn't lower them any more to try to stimulate the economy.

James Hamilton, UC San Diego

NO: The unemployment rate is the lowest it's been in 50 years. Inflation has been low for quite a while but it is starting to pick up. The Fed has been returning very slowly and cautiously to normal monetary policy and this makes good sense. The high deficits may be as important a factor in raising long-term interest rates as anything the Fed is doing.

Gary London, London Moeder Advisors

NO: The Fed rate is a principal tool in its toolbox to manage the economy in the event of excessive inflation, bank failure or recession. It does not impose rate changes based on the political winds. That rate has been at or near zero since the Great Recession 10 years ago. That was then, this is now. The Fed rate has slowly been ratcheting up as the economy has strengthened so they can battle the next economic calamity. If and when that happens, my sense is that the president will be thankful for the Fed.

Norm Miller, University of San Diego

NO: The Fed is being transparent with no surprises. Their mission is set by congress, not Presidents mostly concerned with the state of the economy on election day. Raising rates will slow borrowing and lower asset values, but it will also help contain inflation. At the same time the US borrowing rate has doubled in just 2 years and someday we will have to balance our ballooning budget as we continue to dump our fiscal burden on the next generations.

Jamie Moraga, IntelliSolutions

NO: The Fed is an independent body and they are making decisions on what they think the market can handle. Rates are still at historical lows but investors have been spooked by tariffs, more debt issuance by the Treasury, and inflation concerns. As the Fed increases rates they will see how the market reacts for both the short and long term. Should they see a long term detrimental effect, they can change their course accordingly.

Austin Neudecker, Rev

Is not participating this week.

Bob Rauch, R.A. Rauch & Associates

YES: Rising interest rates are rarely a friend to a healthy economy and to the stock market. When interest-rate increases occur quickly, the impact could be significant to everyone, consumers and businesses alike. Ergo, the Federal Reserve should be prudent and very careful with each additional increase. Forecasting interest rates is not exactly a precise science but the U.S. economy appears to have real strength now -- let's keep it that way.

Lynn Reaser, Point Loma Nazarene University

NO: Reflecting strong momentum and the additional boost from tax cuts, the U.S. economy does not need extra stimulus from monetary policy. Unemployment is at a 49-year low. With a huge balance sheet driven by previous quantitative easing and an interest rate just slightly over inflation, monetary policy is still highly accommodative. The Fed needs to push interest rates up by at least another full percentage point to prevent asset bubbles or an unwelcome acceleration in inflation.

John Sarkisian, Motion Ventures

NO: The Federal Reserve has taken a measured approach to raising interest rates in reaction to a strong economy and signs of inflation. This measured approach is already affecting some sections of the economy including housing and auto sales. How far the Federal Reserve can raise rates without tipping the economy into recession is hard for anyone, including the Federal Reserve members, to predict.

Chris Van Gorder, Scripps Health

NO: The Federal Reserve is not being too aggressive with rates. With economic growth accelerating and wages increasing due to a historically low unemployment rate, it is important for the Fed to maintain a disciplined approach in managing inflation. Any delays would force the Fed to make larger or more frequent rate increases in the future, potentially overshooting its targeted 2 percent inflation rate and risking a recession.

Have an idea for an EconoMeter question? Email me at phillip.molnar@sduniontribune.com.

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