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Trump Claims Yellen Is Holding Rates Low to Aid Obama -- Update

DOW JONES & COMPANY, INC. 13:07 ET 9/12/2016

Republican presidential nominee Donald Trump ratcheted up his criticism of the Federal Reserve and Chairwoman Janet Yellen on Monday, saying the central bank is keeping rates low to help President Barack Obama.

Mr. Trump, presumably speaking of Ms. Yellen, said interest rates have been kept low "because she's obviously political and doing what Obama wants her to do." Mr. Trump, in an interview on CNBC, added "what they (Fed) are doing is, I believe, it's a false market. Money is essentially free."

Ms. Yellen, he said, "should be ashamed of herself."

His comments also marked the latest swing in Mr. Trump's views on monetary policy and the central bank chief, for whom he said he had "great respect" in an interview with The Wall Street Journal four months ago.

Republicans and Democrats have taken aim at the Fed in recent years over its handling of the financial crisis and its easy-money policies. But such harsh criticism of the Fed's interest-rate decisions is unusual from the presidential nominee of a major political party.

A Fed spokesman declined to comment. Central bank officials have repeatedly said politics, and the coming presidential election in particular, won't factor into their decision about when to next raise interest rates. "We are very focused on assessing the economic outlook and making changes that are appropriate without taking politics into account," Ms. Yellen told lawmakers in June.

The Fed held its benchmark short-term rate near zero for seven years until December 2015, when it nudged it up a quarter percentage point to a range between 0.25% and 0.5%.

Fed officials, Mr. Trump said, will keep rates low because "they want to keep the market up so Obama goes out and lets the new guy...raise interest rates -- or her raise interest rates -- and watch what happens to the stock market."

Savers, he said, are "getting creamed" by low rates.

Asked about the Fed's status as an independent agency, Mr. Trump said, "I used to think they were independent, and the Fed is not independent. It's not close to being independent."

Mr. Trump's comments on Monday echoed remarks he made last week to reporters, accusing the Fed of "keeping the rates down so that everything else doesn't go down."

"At some point the rates are going to have to change," he added.

That was a turnabout from comments he made earlier this year, when he said raising interest rates "would be a disaster" for the economy.

In a May 18 interview with Reuters, he said he was "not an enemy" of the Fed and "not a person that thinks Janet Yellen is doing a bad job," although he said he eventually would want to replace her with a Republican nominee.

"I happen to be a low-interest rate person unless inflation rears its ugly head, which can happen at some point," he added.

That was a departure from remarks he made at a November 2015 news conference, when he called Ms. Yellen "highly political" and said "she's not raising rates for a very specific reason, because Obama told her not to...and he doesn't want to see a big bubble burst during his administration."

"Janet Yellen should have raised the rates," he added then.

A White House spokesman at the time said the charges were untrue, and said the administration goes to great lengths to ensure the Fed can make monetary-policy decisions that are best for the economy, not based on political considerations.

Democratic presidential nominee Hillary Clinton hasn't weighed in on interest-rate policy, though her campaign has called for changes in Fed operations, including prohibiting bankers from serving on the boards of the Fed's 12 regional reserve banks.

Mrs. Clinton chided her opponent following his comments last week, and said it was inappropriate for candidates and presidents to weigh in on Fed actions. She also said Mr. Trump should not try to talk up or talk down the economy.

"And he should not be adding the Fed to his long list of institutions and individuals that he is maligning and otherwise attacking," she said.

Ms. Yellen last month signaled growing conviction that the central bank will raise short-term interest rates this year. Fed officials meet next week, Sept. 20-21, and are likely to discuss whether to raise rates.

"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," Ms. Yellen said in an Aug. 26 speech.

Write to Kate Davidson at [e-mail] and Mark Taylor at [e-mail]


(END) Dow Jones Newswires
09-12-161307ET
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