Yellen: Trump doesn’t understand economic policy

Former Federal Reserve Chairwoman Janet Yellen said in an interview aired Monday that President Trump lacks a basic understanding of economics and the central bank’s mission.

When asked during a radio interview with American Public Media’s “Marketplace” if Trump had “a grasp of macroeconomic policy,” Yellen said “no” and questioned if the president could explain what the Fed is supposed to do.

“I doubt that he would even be able to say that the Fed’s goals are maximum employment and price stability, which is the goals that Congress have assigned,” said Yellen, who led the Fed from 2014 through early 2018. 

{mosads}Trump blasted the Fed for raising interest rates throughout 2018, insisting the bank should be aiding his trade agenda by pumping cheap money into the economy.

While the Fed is not instructed to target trade conditions, the president said it should have kept interest rates at stimulatory lows to help overcome the higher costs of imports he had tariffed earlier that year.

“I think comments like that shows a lack of understanding of the impact of the Fed on the economy, and appropriate policy goals,” Yellen said.

Yellen also criticized Trump’s focus on bilateral trade deficits — the difference in value between a country’s exports to and imports from another nation. The president has cited the steep U.S. trade deficit with China as proof of unfairness, though most economists say the metric doesn’t reflect the full picture of trade between the nations.

“I think almost any economist would tell you that there’s no real meaning to bilateral trade deficits, and it’s not an appropriate objective of policy,” Yellen said. 

Yellen left the Fed in February 2018 after Trump declined to renominate her for a second four-year term leading the central bank. While Trump had considered renominating her, he chose instead to elevate then Fed Governor Jerome Powell, a Republican, to be chairman.

Yellen was the first Fed chair in almost four decades to not be renominated for the spot, breaking a precedent that spanned presidencies and crossed party lines. Powell shares Yellen’s tilt toward patience with rate hikes, but is more palatable to GOP senators wary of keeping rates low.

Trump soured on Powell shortly after he replaced Yellen and continued on the Fed’s path of gradual rate hikes.

The Fed has raised interest rates nine times since December 2015, seven times since Trump took office in 2017 and four times under Powell.

Trump said the Fed has “gone crazy” and reportedly considered trying to fire Powell late last year. But the president relented in January as the Fed signaled an indefinite pause on rate hikes over concerns of global headwinds.

Yellen told “Marketplace” that Fed policy “would have been broadly similar” had she been renominated, and praised Powell for doing “a very good job.”

She also said she doesn’t think Trump’s attacks on the Fed have had “a tremendous impact yet,” but fears they could “undermine confidence” in the central bank and hinder its response to a crisis.

Updated 4:58 p.m.