JACKSON, Wyo. – President Trump characterizes himself as a master deal maker who gets what he wants. But while trying to push the Federal Reserve to lower interest rates, he fights with a powerful opponent: technocrats.
The Fed lowered borrowing costs in July amid mounting trade uncertainties, but it has refused to promise the kind of aggressive interest rate cut campaign Trump wants. The central bank's unwillingness to bow to the White House has frustrated Trump, who suggested Friday that the Fed leader he appointed, Jerome H. Powell, was the enemy of the United States.
But as central bankers and top economists gathered this weekend in Jackson, Wyo., For their annual conference, there were no indications that monetary thinking was getting any closer to Trump's – and there were plenty of signs that officials and top economists were closing the ranks to protect Mr. Powell and the institution he heads when it came under direct attack.
Fed officials are economists and business people who have pledged, with almost religious zeal, to a set of two goals: full employment and stable inflation. They focus on these mandates as they try to protect themselves – and the central bank – from being drawn into the political spell.
"When you have the privilege of working for an institution as honorable as the Federal Reserve, you must take on the challenges that are affecting you," said Loretta Mester, President of the Federal Reserve Bank of Cleveland, Friday in a CNBC interview when asked about Trump's attack.
Mr. Powell often says the Fed can make mistakes, but he claims it "won't make character or integrity errors."
The Fed's rationale for ignoring Trump's press campaign is rooted in cold equations. Years of academic research and history show that nations that let policy control interest rates risk faster inflation and are subject to painful boom-and-bust cycles. Most of the economy sees a monetary policy system free of political influence as an essential prerequisite for stable growth.
While the Fed is willing to act to sustain economic expansion, officials continue to say the US economy is still strong, with low unemployment and consumer spending, suggesting they have no rush to initiate the kind of big cut Trump wants. Politicians were sharply divided when they voted to cut interest rates for the first time in ten years in late July, according to recently released minutes from a recent Fed meeting.
Mr. Trump, who as a candidate accused the Fed of keeping interest rates low to benefit President Barack Obama, has increasingly pushed the central bank to support executive branch priorities. The President, who is running several trade fights at once, wants the Fed to act as a defensive shield and help promote growth and exports. He has posted more than 20 Fed-related comments on Twitter so far this month, averaging about one a day.
If Trump plays on that idea – escalating the trade war in ways that further fuel uncertainty and damaging the economy, confident that the Fed will clean up some mess – he could create a growth spell that the Fed has little ability to offset.
"While monetary policy is a powerful tool to support consumer spending, business investment and public trust, it cannot provide a definitive rulebook for international trade," Powell said in a speech on Friday.
When the president's criticism takes a sharper edge, monetary policy makers are ready to protect Mr. Powell.
Mr. Trump has previously looked into the possibility of firing or dismantling Mr. Powell, and on Friday, he told reporters he would welcome the Fed leader's resignation.
"Do I want him to retire? Let me put it this way: If he did, I wouldn't stop him," the president said, talking on the lawn of the White House.
"I don't think he's much of a chess player. But I have him, so you know, that's what I have," he said.
If Trump tried to strip Mr. Powell of his title, the current 10-member Federal Open Market Committee – which sets interest rates and selects its own leader – may elect him like its leader, a Fed official said in the background.
It would create an unparalleled divide of power, with Trump's new nominee serving as chairman of the board, provided the person was endorsed by the Senate, and Mr. Powell chairs the policy committee.
Although Trump makes no attempt to fire or reprimand Mr. Powell, his continued assaults on the Fed, combined with his aggressive trade struggles, current and former politicians on edge.
"We are in a system where things are getting worse day by day and it is not a service for anyone, at least privately, not to focus on what the main issues are – and they would be the behavior of the United States, unfortunately , "Stanle y Fischer, a former Federal Reserve deputy appointed by Obama, said during the event.
Mr. Trump's trade fights could eventually get the Fed to give the president what he wants in the form of another interest rate cut if the economy is further weakened. And the Fed may lose its appearance as independence as it lowers borrowing costs. Some of the spectators will see any move, which comes at a time of low unemployment and high consumer spending, as a capitulation to the president.
Officials have left the door for future cuts, but remain uncommitted when they come or how big they may be when they make their plans for employment and inflation targets.
"Our challenge now is to do what monetary policy can do to sustain enlargement," Powell said in a speech on Friday.
At this weekend's conference, Fed officials seemed hopeful that the world could return to its pre-Trump norm as the White House largely avoided talking about the Fed.
In remarks at the start of the Jackson Hole Symposium, Esther George, the host and president of the Federal Reserve Bank of Kansas City, gave a speech on people and wildlife in the National Park where the conference was held that seemed to parallel the tension between politicians and moneta ry politicians.
"Things get a little more interesting" when habitat types overlap, she said, but things are eventually resolved, "usually with the intruder's retreat."