WASHINGTON (Reuters) - President Donald Trump’s top economic adviser said on Friday the White House would like the Federal Reserve to reverse some of its recent interest rate hikes and stop shrinking its balance sheet to protect the U.S. economy from weakness overseas.
“I am echoing the president’s view,” National Economic Council Director Larry Kudlow told CNBC, confirming that he had told news website Axios that he would like the U.S. central bank to cut rates by a half-percentage point.
“He would also like the Fed to cease shrinking its balance sheet, and I concur with that view,” Kudlow said.
Kudlow’s remarks reflect an unusual public split between the White House and the independent central bank.
Prior administrations have taken care not to comment on Fed policy, but Trump has railed repeatedly against the bank’s rate hikes. Even so, most of his advisers have tread more carefully and Kudlow’s comments were notable for their specificity.
“This is our view. This is his view. This is my view,” he said. “The Federal Reserve is an independent central bank. They’re going to do what they’re going to do.”
A prospective Federal Reserve Board of Governors nominee, Stephen Moore, told Fox News on Friday that he would consider reversing the Fed’s December interest rate hike but said he was not necessarily in favor of the half-point rate cut recommended by Kudlow. Moore was quoted as saying he favored such a cut by the New York Times on Tuesday.
The Fed last week brought a three-year rate-hike cycle to an abrupt end as it abandoned projections for any further increases in borrowing costs this year and said it would stop shrinking its balance sheet in September.
“In the absence of inflation, with some of these global threats, our view is at some point ... I wouldn’t mind seeing the Fed drop their target rate,” Kudlow said. “We don’t want to threaten this great recovery.”
“There’s no emergency,” he added, saying news website Axios may have misquoted him as saying he wanted the Fed to cut rates “immediately.”
“The economy looks fundamentally quite healthy. We just don’t want that threat.”
While he said he felt the Fed had gone too far with rate hikes, he said the Trump administration was standing by Fed Chairman Jerome Powell.
“He’s our chairman. We’re not going to displace him.”
Reporting by Eric Beech; Writing by Tim Ahmann and Trevor Hunnicutt; Editing by Marguerita Choy and James Dalgleish