One of President Trump’s top economic advisers said Friday the White House thinks the Federal Reserve should cut interest rates by half a percentage point to protect robust U.S. economic growth.
National Economic Council Director Lawrence Kudlow said he would like to see the central bank lower its benchmark federal-funds rate by 50 basis points, which would put it in a range between 1.75% and 2.00%. Mr. Kudlow also said it was a mistake for the Fed to raise rates above 2%.
“I am echoing the president’s view. He has not been bashful about that view,” he said in an interview with CNBC. “He would also like the Fed to cease shrinking its balance sheet, and I concur with that view.”
The economy looks fundamentally healthy, Mr. Kudlow said, “we just don’t want that threat.”
“In the absence of inflation, with some of these global threats, our view is at some point, I don’t know about immediately … at some point, I wouldn’t mind seeing the Fed drop their target rate,” he said.
The call for a rate cut by a White House official is unprecedented in recent history, and appears at odds with the administration’s insistence that the U.S. economy is on course for another year of robust growth, thanks to its tax and deregulation policies.
A Fed spokeswoman declined to comment.
The comments echoed remarks made by Stephen Moore, Mr. Trump’s latest pick for a Fed board seat.
When asked on Monday if the Fed should cut rates by 0.5 percentage points to reverse the increases last September and December, Mr. Moore said it should be “under consideration” by the Fed.
Fed officials last raised rates in December to a range between 2.25% and 2.5%, but they indicated earlier this month they may be done raising rates for the foreseeable future, amid slowing global growth and uncertainty about trade policy.
Shortly after the December increase, Mr. Moore delivered a scathing assessment of Fed Chairman Jerome Powell in an interview with The Wall Street Journal, calling him “totally incompetent” and saying he should resign. Mr. Moore walked back those remarks this week, but said the rate increase was still a mistake.
In response to Mr. Kudlow’s statement Friday, Neel Kashkari, the Minneapolis Fed president said, “I don’t think we should be reacting to short-term economic data. We can introduce uncertainty and introduce our own volatility” by overreacting to fluctuations.
Mr. Kashkari said Friday that it wasn’t clear whether the Fed’s policy path would be to keep rates steady, raise them or lower them this year. “It could be any of the above. It really is going to depend on how the data turns out over the next few months and few quarters,” he said in an interview.
Mr. Kashkari said the labor market’s performance in the months ahead would be particularly important. The economy added just 20,000 jobs in February, down from the 186,000 average over the past three months.
“If we see two or three jobs reports like the last one where job growth really has ground to a halt, I would take that very seriously,” said Mr. Kashkari.
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