Fed nominee Moore calls December's rate hike a 'substantial mistake'

Ann Santiago
March 25, 2019

Moore has emerged as an ardent critic of the Federal Reserve Board under its current chairman, Jerome Powell, who fell out of favor with Trump past year after the Fed's rate increases.

America's secretive central bank - announced it had no plans to raise interest rates during 2019 (and would probably hike rates just once in 2020).

In response to the news, Mike Fratantoni, chief economist of the Mortgage Banker's Associate, said that there were bigger takeaways from the Fed's announcement.

Asked about what level of inflation would prompt a rate increase, he said he wasn't focused on an exact point estimate. Placing him on the board may be the president's attempt to check Powell and head off further tightening of USA monetary policy that Trump believes could slow economic growth before his 2020 re-election campaign.

Moore, a well-known and often polarizing figure in Washington political circles, served as an adviser to Trump during the 2016 campaign. But we would be over four [percent] if they didn't do all of the interest rate hikes, and they tightened. That's a shift by the president, who would previously opted for Republican establishment Fed picks including Powell, Vice Chairman Richard Clarida and Vice Chairman for Supervision Randal Quarles. Powell and Trump share the goal of a healthy economy.

The choice of Moore drew broad criticism, as economists across the spectrum noted that Moore's writings and comments seemed to confuse basic concepts, and had been wildly inconsistent over time.

Trump made the offer to the economic commentator earlier this week, but Moore still has to clear background-check process for the nomination, which would take weeks or months, the Wall Street Journal (WSJ) quoted an unnamed senior administration official as saying Friday.

Mr Moore's selection is just the latest step in Mr Trump's effort to exert control over the U.S. central bank, which was designed by Congress to be independent from short-term political pressure. In the article Moore argued that the Fed's rate hikes promoted deflation and described the central bank as the "last major obstacle" to the United States staying on a good path. Wall Street cheered Janet Yellen's decision to keep the cheap dollars flowing.

On Friday, the Treasury Department reported a record monthly budget deficit of $234 billion.

"The Fed may still suffer some "losses" on these securities sales, but the danger of future inflation and political pressure outweigh the consequences of these losses", he wrote.

The Fed's policy rate is now set at 2.25 per cent to 2.5 per cent.

At the end of a two-day policy meeting, the Federal Open markets Committee (FOMC) said the move was meant to meet market expectations and reflected the central bank's patient approach regarding monetary policy changes.

Trump remarked to Kudlow that he should have appointed Moore to be Fed chairman, the people said and directed Kudlow to call Moore and gauge his interest in a board seat.

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