Fed Chair Defends Independence in Clash with Trump

Federal Reserve Chair Janet Yellen yesterday dismissed claims by Republican presidential candidate Donald Trump that the central bank is providing cheap money to the economy to support the Obama administration. Ahead of the Fed’s meeting, Trump stated that Yellen should be “ashamed” that interest rates for primary and secondary money markets are low.

– “She is obviously political and is doing what Obama wants her to do, and I know it shouldn’t be that way,” Trump told CNBC.

Yellen responded that the Fed “decides what is the best course for strengthening price stability and full employment” while assessing various risks to see what affects the outlook.

– “We do not discuss politics at our meetings and do not take politics into account for our decisions,” she said according to a report by Time.

Normalization

The Fed maintained low interest rates on Wednesday, but Yellen stated that she expects one increase by the end of the year if the labor market continues to improve and if no new major risks emerge.

This coincides with the unexpected announcement by the Bank of Japan that an increase in interest rates in its quantitative easing program is also on the horizon.

The American, Japanese, and since last year, the European central bank are creating large amounts of fresh money in an effort to stimulate economic recovery following the financial crisis.

The ECB’s activities in providing “cheap money” for borrowing through favorable financing conditions are also felt by our companies.