As Yellen and the rest of the Fed cohorts talk rising interest rates and balance sheet shrinkage, Trump makes it clear: the dollar is too strong. As such, he opposes the Fed’s recent efforts on interest rate policy. He likes low interest rates. This makes sense — politicians love cheap debt — though it is a sad deviation from his more critical stance on financial bubbles during his candidacy years.
What is interesting though, as he very clearly takes on the Fed’s normalization narrative, he states that he has yet to decide whether Yellen should stay as Fed chair. WSJ:
He left open the possibility of renominating Federal Reserve Chairwoman Janet Yellen once her tenure is up next year, a shift from his position during the campaign that he would “most likely” not appoint her to another term.
This seems more like polite posturing than anything, given that Yellen’s Fed is obviously on an opposite track than a weak dollar policy, at least in the short term. With the two board vacancies at the Fed, the power is clearly in Trump’s hands. If Yellen too forcefully challenges the Trump “weak dollar” stance, she could find herself without the chairmanship when her term expires.
He even goes so far as to say: “I like her, I respect her.”
Whatever the case, Trump obviously is gunning for a weaker dollar and lower interest rates. This is a stark aberration from the Fed’s budding 2017 narrative. The Trump-Yellen showdown continues, even if it remains behind the vocal niceties.
