Trump thinks the Fed has gone 'loco.' Wait until he sees what it does next.

President Trump thinks the Federal Reserve has gone "locomotive" for a greater interest rate from 0.75 to 2.25 percent during the first 21 months in office, which is to say that he's really not going to like the next two years. That's because the central bank is strongly signaling that it's going to continue raising rates for the future.

This is a story about two things: how strong is the economy, and how worried the Fed is?

The easiest way to think about it is that, if the economy is a downhill, the Fed's job is to keep it moving at a responsible 55 miles per hour by stepping on and off the brakes as needed. This might sound simple, but, as train Fed chair Ben Bernanke pointed out back in 2004, the reality is a lot more complicated. There are a couple reasons for this. First off, the economy does not have the most reliable speedometer. The Fed can get an idea of ​​how fast (or slow) it's been moving when the numbers come out every month, and the gross domestic product ones do every quarter.

But it's only that: an idea. These numbers can be quite volatile, and they are subject to quite a bit of revision. Which means they are not always the best real-time guide to policy. Not to mention that it can take the economy when the Fed is raising or lowering. It can also be hard to tell if it needs to be done, or just wait for it.

Then, to continue the analogy, there's the question of how steep the hill is. If it has a pretty good gradient, then it would be easier to lower unemployment to higher inflation, so the Fed would have gone on. If it did not, though, the Fed could afford to be much more patient, since there'd be little risk that we would careen out of control. But, again, the problem is that this is not something the Fed can observe directly. It can only be guessed based on recent experience.

Now, ever since the 2008 crisis, the Fed has thought that the economy would be growing much less than before, and the metaphorical hill we would talk about would be so flat to almost nonexistent. As a result, it was suggested that it would only barely need to tap the brakes even far into the future. Indeed, it was estimated that they would be able to get to the Goldilocks area where they were neither slowing down nor speeding up the economy. That had been 5 or 6 or even 7 percent as recently as 10 years ago.

So if you thought that growth was going to be so low that the Fed would not want to subtract too much from it, it made sense to assume that it would be worthwhile to reduce the rate of loss to 3 percent, and then stop. Well, at least it was until a few weeks ago. Since then, though, Jerome H. Powell's Fed Chair has said that it is likely to be a "long way from a neutral, probably," and a few of his colleagues have been pushed back to the point of view, whatever it is. In the most dovish case, then, things might be more hawkish than we thought. It's possible that rates get up to 3.5 or 4 percent in the next two years or so. What's changed? Pretty simple: The $ 1.8 trillion of stimulus the Trump administration has the same effect on the economy, even if it is economic, is moving down to a very slight slope, the Fed is worried we might start to go a little too fast. In that case, it's understandable that they might want to ride the brakes a little bit more.

At the same time, Trump makes a very good time when it says it would be better when it comes to inflation – for example, when inflation is actually higher than 2 percent target – rather than doing so preemptively. He's just going through this in a very unspeakable manner, publicly pressuring the Fed in a way that seems to implicitly threaten its independence. (The reason is that it is always a political incentive to push for lower interest rates, even if there is an economic reason for them).

Trump, then, has good reasons for thinking that the Fed is thinking about it, but it does not allow the Fed to think about it. What makes this event more intractable? It is more likely that the Fed has been able to do so, in part, to show that it can.

The Fed is going to be driving Trump crazy for a while.