Senate banking chairman aligns with Trump on Fed rate cuts

Bloomberg

Senate Banking Chairman Mike Crapo said that he thinks the Federal Reserve should cut interest rates to boost growth, aligning him with President Donald Trump and his latest choices for the Fed board, Stephen Moore and Herman Cain.
“I personally think that we’re at a point where they could be reduced a little bit now,” the Idaho Republican said. “I just think that at their current level they are creating a little bit too much of a dampening on the economy.” The Senate Banking Committee chairman’s comments are a significant turn in Powell’s peaceful relationship with Congress, which he has tried to cultivate with frequent visits. Unlike the White House, which has been relentless in its attacks on the Fed since December, Senate Banking along with House Financial Services has direct oversight authority over the central bank.
Both committees have the power to alter the Federal Reserve Act through legislation and until now have let Powell do his job without much criticism of monetary policy. The comments may also show Crapo in sync on the subject with Moore, a conservative economist who in a March 13 Wall Street Journal opinion column called the central bank “the last major obstacle” to Trump’s economic agenda.
Moore advised the Trump campaign on economic policy and is currently a visiting fellow at the Heritage Foundation. Cain, Trump’s other controversial Fed choice, went from calling higher interest rates “very good news” in 2017 to telling Bloomberg News earlier this year he was concerned the Fed had gotten too aggressive in rate hikes and he was more worried about deflation than inflation.
Crapo would preside over confirmation hearings for both men, who would each face difficult confirmations if Trump follows through on plans to nominate them.
“If and when a nomination is made, we will then proceed as we have with all nominations, to do the vetting and hold a hearing and process them,” Crapo said, declining to comment on their prospects.

CONFIRMATION CONCERNS
Senate Republicans, usually reluctant to go against Trump in public, have begun raising questions about the prospect of a Cain nomination.
Senator John Thune, the No. 2 Republican leader, said the Senate GOP leadership team and some individual members have been warning the White House that Cain could have a tough time getting confirmed.
“I’m not saying that he couldn’t get there, but he starts off with some concerns and we’d have to confirm him with all Republican votes,” Thune said. “There aren’t going to be Democratic votes for him. That’s what he would be facing going into the process.” Trump’s latest Fed choices also have been roundly criticised by economists of all stripes.
Greg Mankiw, a Harvard University economist and former adviser to George W. Bush, wrote on his blog that Moore “does not have the intellectual gravitas” for the job.
Scott Sumner, director of the monetary policy program at the libertarian Mercatus Center at George Mason University, has questioned both Trump picks.
“Do the candidates have good judgement on policy?” he wrote on his blog, The Money Illusion. “I am not aware of any coherent economic model, liberal or conservative, which would justify calling for tighter money in the early 2010s and easier money today.”
Economists surveyed by Bloomberg expect the economy to expand 2.4 percent this year. Monetary policy is just one risk. Trump’s trade wars, slowing growth in Europe, and Brexit also top the list of concerns. US economic data in the first quarter has been distorted by weather and the government shutdown.