Mnuchin: Powell and Trump Had 'Productive' Meeting

Mnuchin: Powell and Trump Had 'Productive' Meeting

Former Reagan Economist Art Laffer on Federal Reserve policy and the outlook for US economic growth.

Federal Reserve chair Jerome Powell joined USA president Donald Trump for an "informal dinner" in the White House on February 4. The Fed is supposed to be independent from politics, and it is hard to remove a Fed governor except for "cause", which has typically been interpreted by courts as egregious wrongdoing.

Powell's comments were "consistent with his remarks at his press conference of last week", the Fed said in a statement.

First word of the dinner came from the Fed, which put out a statement Monday saying that Powell "did not discuss his expectations for monetary policy" during his meeting with the president.

Timing aside, "it is within the normal operating procedures for presidents to ask Fed chairs for a perspective", on the economy, particularly with a meeting on the eve of the president's State of the Union address, said Mark Spindel, founder of Potomac River Capital and co-author of a study of Fed political oversight. "Relative to trying to sack the guy, sitting down to dinner is a non-story".

Trump a year ago repeatedly exerted pressure on the Fed to hold off on rate hikes, saying that the central bank risked impeding economic progress with a tightening monetary policy. "I think Jay Powell is very clear that he wasn't going to say anything in private inconsistent with what he said publicly".

Meetings between a president and Fed chief are rare but not unprecedented. Barack Obama met with then-Chair Janet Yellen in 2016, for example.

It's also possible that when it comes to interest rate hikes, the president doesn't have anything to worry about in the year ahead. But presidents are not supposed to dictate Fed policy. He called the Fed's moves to boost rates his biggest threat.

The urge to fire Powell has apparently dissipated, with administration officials assuring markets and the public that the Fed chair's job was secure.

The dinner was held "at the President's discuss recent economic developments and the outlook for growth, employment and inflation".

It is an invitation every Fed chair receives, and which can not easily be turned down.

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