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Former Fed Chairman in New York, Bill Dudley, on Thursday called on CNBC economist Larry Summers to ask the central bank to consider the election of 2020 when the US government announced that it would not be a good choice. The development of monetary policy is "totally irresponsible" behavior.
In an article published Wednesday in Bloomberg, Dudley suggested that the Federal Reserve could and should try to overthrow the election against President Donald Trump. Dudley has urged current central bankers not to lower interest rates further to avoid any negative impact on the US economy that could occur as a result of the Chinese president's trade war with China.
"For a former trusted Fed official, whose thought will inevitably be tied to the Fed, to recommend that they … [use] Rates that tarnish the economy and influence a presidential election are totally irresponsible and constitute an abuse of the privilege of being a former Fed official, "said Summers, former treasury secretary under President Bill Clinton and Economic adviser to President Barack Obama.
Summers, a long-time Trump critic who had been considered by Obama for the head of the Fed, said Dudley's remarks took the discussion out "from the field of economics" and "in the field of policy".
"The job of the Fed is to stay out of politics," said Summers.
The controversy over Dudley follows Trump's sustained attacks on the central bank, which described President Jerome Powell as "helpless" and asked if Powell was a "bigger enemy" of the country than the Chinese president. Xi Jinping.
Trump, who has named Powell as the Fed's president, wants the lowest rates to boost the economy. Dudley argued that this would prompt the president to step up his trade fight against China, accusing critics of slowing the US economy and deepening fears of recession.
No matter what Trump says or does, Summers said the Fed and its appointed members should not seek to "coerce and influence the behavior of the US president."
"It's totally misunderstanding the role of appointed officials in a democracy," Summers added.
Summers argued that Fed officials developing their monetary policy to achieve certain political outcomes would be similar to unelected military leaders who ignore the president's instructions. "It is not up to the army to lie to the commander-in-chief, to deceive the commander-in-chief or to refuse to follow the orders of the commander-in-chief in order to pursue what she considers to be the the country's best political policy. "
Summers calls Dudley, who led the New York Fed from 2009 to 2018, a friend, saying that he "had admired many things" that Dudley had accomplished. But Summers said Dudley should make it clear that his beliefs are entirely his own and that he "has no reason to believe that the things he thinks are currently being considered or discussed or are part of the Fed's thinking process." ".
The Fed's next monetary policy will take place in September and the market is confident that central bankers will further reduce their rates by a quarter point, after lowering rates by the same amount last month, the first of its kind for more than ten years.
The Fed raised its rates four times in 2018.
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