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Anticipating A Recession, Trump Points Fingers At Fed Chairman Powell (#GotBitcoin?)

President Trump is blaming the Federal Reserve for holding back the economy and stock market despite the central bank’s recent decision to do two things he wanted—halt rate increases and stop shrinking its asset portfolio. Anticipating A Recession, Trump Points Fingers At Fed Chairman Powell (#GotBitcoin?)

The president blasted the central bank and its leader at three meetings in the past week alone.

The president blasted the Fed and Chairman Jerome Powell at three meetings in the past week alone, telling Republican senators, supporters and staffers that if it wasn’t for the central bank’s past rate increases, economic output and stocks would be higher and the U.S. budget deficit would be rising less.

“He was pretty rough,” said one person who directly heard the comments at one of the meetings. Mr. Trump also blamed Treasury Secretary Steven Mnuchin for recommending Mr. Powell for the top Fed job. “Mnuchin gave me this guy,” Mr. Trump said.

Mr. Trump recalled a recent phone conversation he had with Mr. Powell, this person said. “I guess I’m stuck with you,” the president recalled telling Mr. Powell. The Fed chief took a brief phone call from Mr. Trump on March 8, a Fed spokeswoman said when asked about the conversation, declining to elaborate further. The phone conversation hasn’t previously been reported.

The president continued to gripe about Mr. Powell during a policy briefing with staffers on an unrelated matter at the White House on Monday, according to an administration official. This person described Mr. Trump’s drumbeat of unprompted and critical Fed commentary as the latest point on a recurring list, or “greatest hits,” that Mr. Trump likes to raise.

Signs of the president’s irritation flared anew two weeks ago, when Mr. Trump announced he would nominate Fed critic Stephen Moore to the central bank’s board of governors.

Last week, Mr. Trump’s top economic adviser, Lawrence Kudlow, told The Wall Street Journal and other outlets that the president wanted the Fed to cut its benchmark rate by half a percentage point, effectively reversing rate increases from late last year that Mr. Trump had publicly opposed.

The critical drumbeat is complicating Mr. Powell’s job by fueling speculation among some market participants that the Fed is caving to political pressure, even though Mr. Powell and Fed officials uniformly say this won’t occur. At worst, it could be a prelude to a potentially historic court battle should Mr. Trump ever attempt to remove Mr. Powell.

Whenever the topic of Mr. Trump’s complaints comes up in public, Mr. Powell says political concerns don’t influence Fed deliberations. Officials have cited several reasons for the abrupt policy shift at the start of the year, especially intense market volatility, a slowdown in global growth and muted inflation pressures.

“People should know that the Fed has a very strong culture around nonpolitical activity,” Mr. Powell said at a moderated discussion in Atlanta in January. “We have a strong culture. It’s not a fragile one. It’s not subject to being disrupted. We will always do things that way.”

Those assurances haven’t erased doubts among some market participants that the Fed is reacting to political pressure, in part because the central bank’s recent policy shifts took them by surprise.

Because the prior three presidents didn’t comment on the Fed, the question of presidential pressure “is something markets largely had put aside” when evaluating the central bank’s decision making, said Mark Spindel, a Washington-based investment manager who co-wrote a history of the Fed. Even if the Fed ignored political pressure in December, it is possible that Mr. Trump’s reported threats to fire Mr. Powell amplified market turmoil at the end of December, Mr. Spindel said. The market tumult, in turn, factored into the Fed’s policy shift, creating a “self-fulfilling aspect” of presidential pressure, he said.

Mr. Trump’s advisers have said the president is entitled to speak his mind about the Fed.

Mr. Powell has worked assiduously to meet with lawmakers on Capitol Hill and regularly emphasizes that the central bank answers to Congress. He is set to address House Democrats on the economy next week at their annual policy retreat in Northern Virginia.

Mr. Trump’s frustration has been building since last summer, when the Fed prepared to lift its benchmark rate above 2%. His unhappiness boiled over in December, when market volatility accelerated in the days before and after the Fed raised its short-term rate for the fourth time last year, to a range between 2.25% and 2.5%. Mr. Trump had called on the Fed to stop raising rates and to halt the process of shrinking its bond portfolio.

Mr. Trump wondered aloud at the time to his advisers about whether he could replace Mr. Powell, according to people familiar with the matter. His advisers later clarified that Mr. Powell’s job was safe because he couldn’t be dismissed over a policy disagreement. Mr. Powell began his four-year term as chairman in February 2018 after Mr. Trump tapped him for the job.

In an effort to reduce tensions, Mr. Mnuchin arranged for Mr. Powell and Fed Vice Chairman Richard Clarida to join him for dinner with Mr. Trump in the White House residence in early February. Fed and administration officials took steps to ensure the central bank could manage how the public learned about the dinner to minimize interpretations of political interference.

For example, Mr. Mnuchin waited until after the Fed’s rate-setting committee met in late January to extend an invitation to Mr. Powell. Meeting with Mr. Trump before the Fed’s policy meeting would have added to existing speculation about political interference. In addition, the Fed immediately disclosed the dinner after it ended.

For the Fed, the market turmoil in December had been an important turning point. When officials met on Dec. 18 and 19, most projected between one and three rate increases in 2019. Just 16 days later, during the session in Atlanta, Mr. Powell began signaling that the Fed would pause rate increases and shift to a more flexible stance on the portfolio runoff, a position endorsed shortly after that by almost every other Fed official. Most of those officials haven’t been appointed by Mr. Trump and instead are presidents of reserve banks who are named by independent boards—a design feature that insulates the institution from political pressure.

At their meeting in March, most Fed officials projected no rate increases at all this year even if the economy performed as they expected. At the same time, they announced they would slow the process of shrinking their $4 trillion asset portfolio starting in May and that they would end it by October.

The White House and the Fed typically share the same goals over the long-run—low inflation and unemployment amid healthy economic growth—but at times, they can disagree over how to achieve them. The Fed worries about rising inflation or asset bubbles that could derail an expansion and guides interest rates higher or lower to keep those pressures in check.

More recently, White House advisers have played down worries that Mr. Trump would try to fire Mr. Powell, though they haven’t ruled it out entirely because they say it is impossible to predict the president’s actions.

Mr. Powell said in an interview on 60 Minutes last month he doesn’t believe the president has the authority to remove him over policy disagreements, and he wouldn’t resign his post if asked to do so by the White House.

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Monty H. & Carolyn A.

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