Economists say that Trump's potential Fed nominees could hinder the central bank's ability to respond to a recession.
Traders at the New York Stock Exchange listen as Federal Reserve Chair Jerome Powell is seen on a video screen giving a news conference from Washington after the Fed announced a rate increase, Wednesday, Dec. 19, 2018.President Donald Trump's latest Fed picks have raised concerns about political interference in monetary policy.
Not only could political interference in monetary policy lead to high levels of inflation or unemployment, it might also limit the amount of leverage policymakers have in the event of a downturn. Raising interest rates can prevent the economy from overheating, while cutting them stimulates activity. While the economy remains solid by almost any measure, the Fed cited signs of slowing activity when it paused its three-year hiking campaign this year. Trump has long been, efforts that could be bolstered through his most recent nominations.
But central banks play a crucial role in guiding expectations for the economy, particularly in the face of the uncertainty associated with recessions. A consensus helps send a clear signal to businesses and consumers, said Josh Wright, a former Fed staffer who is now the chief economist at iCIMS.
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