December 11, 2019

Fact-Checking Trump’s Tweet About Too-High Interest Rates

President Trump has made a regular habit of criticizing the Federal Reserve, and on Friday he tweeted that the central bank’s “faulty” decision-making was causing Americans to pay higher interest rates than other nations.

The Federal Reserve is supposed to keep the economy growing at a steady pace. Mr. Trump nominated its chair, Jerome H. Powell, and three of its other four sitting governors, but those leaders are confirmed by the Senate and operate independently of the White House. And Mr. Trump has no tie to the 12 Fed district bank presidents, who are selected by regional representatives. The Fed is insulated from politics by design so that it can make good long-term decisions rather than responding to election cycles.

The lack of control seems to rub at the president. He regularly blasts Fed policy, blames Mr. Powell and his colleagues for weakening the economy, and points out that President Xi Jinping of China has far more control over his own central bank. He has even reportedly looked into firing or demoting Mr. Powell, though he has since said such a move is not under consideration — and it’s not clear that it would be legal.

Here’s a fact check on his latest comments.

What Mr. Trump Said

“Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries, when they should be lower. Correct!”
on Twitter on Friday

This is misleading

It is true that the Federal Reserve has raised interest rates nine times since 2015, leaving the federal funds rate, its main policy tool, at 2.25 to 2.5 percent. That is, indeed, far higher than rates in advanced economies, including the eurozone and Japan, where some policy rates remain in negative territory.

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