Trump’s assault on the independence of the United States’ central bank and the integrity of its leader had a hostile tone that is rare, if not unprecedented, for a presidential nominee.
Yellen is keeping interest rates “artificially low to get Obama retired,” Trump said in a phone interview on CNBC. “Watch what’s gonna happen afterwards. It’s a very serious problem.”
“I think she’s very political,” he added. “And to a certain extent, I think she should be ashamed of herself.”
Trump appeared to be suggesting that the low federal funds rate ― an interbank interest rate controlled by the Fed that serves as a benchmark for spending throughout the economy ― was keeping the economy afloat to boost support for Obama.
Trump made a similar accusation last week, which drew condemnation from Hillary Clinton, who said it was inappropriate for presidents or presidential candidates to comment on Fed interest rate policy.
Trump’s comments on Monday were his harshest indictment of Yellen to date.
“The words ‘ashamed of’ are not appropriate,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and a former economist at the Fed. “He could question her judgment but he has gone beyond that, questioning her motivations.”
Attacking the Fed is not new for presidential candidates, but it is uncommon for a party’s standard-bearer to assault the bank and its chair in such personal terms.
During the current election cycle, Sen. Bernie Sanders (I-Vt.), then a Democratic presidential candidate, criticized the Fed’s decision to raise its benchmark rate in December, but did not cast doubt on Yellen’s integrity.
He could question her judgment but he has gone beyond that, questioning her motivations. Joseph Gagnon, Peterson Institute
There is every reason to believe Trump’s broadside against the central bank is a political maneuver rather than a genuine policy stance. It allows the Republican nominee to dismiss the election results as rigged, since a stronger economy would help Clinton, the incumbent party’s presidential nominee.
The reality TV star asserted that the Fed had shed its independence to help Democrats much as the Department of Justice had in declining to prosecute Clinton over her use of a private e-mail server as secretary of state.
“I used to think that the Justice Department worked independently also and I used to think that the FBI was independent also, but that’s obviously not possible because Hillary Clinton is guilty as hell and everybody knows it,” Trump said.
“I used to hope that the Fed was independent and the Fed is obviously not independent,” he said. “It is obviously not even close to being independent.”
Trump’s views on monetary policy have been all over the map since announcing his candidacy in June 2015.
In August 2015, Trump said low interest rates were feeding a financial asset bubble and therefore needed to rise.
But in May, Trump said rates needed to stay low to keep the value of the dollar from getting too high and hurting U.S. exports. He also said he would replace Yellen as chair because she is “not a Republican.”
Regardless of his intentions, Trump’s case that interest rates would be higher if not for political interference is weak on substance.
The Fed kept the federal funds rate at or near zero from December 2008 until December 2015, because of the depth of the Great Recession in the wake of the financial crisis. Currently, the benchmark rate is between 0.25 and 0.5 percent.
“If that was too low, or artificial, we should have had an overheating economy,” Gagnon said. “We should have runaway inflation, but we have had none of those things.”
The Fed even engaged in several rounds of quantitative easing, or massive securities purchases, to stimulate the economy further after the federal funds rate was already at its lowest level.
“If anything we should have had easier monetary policy, which we had with quantitative easing,” the former Fed economist concluded. “I argue that there should have been more quantitative easing and it should have been done sooner.”
Editor’s note: Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.