In most broad strokes, and despite a probable slowdown in 4Q, the economy is doing about as well as it could be doing. Moreover, the US markets are doing about as well as it could reasonably be expected to do. Equity markets have hit consecutive all-time highs over the past few weeks, and fixed income investors have been rewarded with three interest rate cuts in 2019, which boosts prices on any bonds in their inventory.
Most measures of excess and shortage show an economy that is not being held up by a crippling lack of confidence, inflation, trade imbalance, or any other extraneous influence in the short-term. Monetary conditions are not unfavorable; in fact, they’re rather lenient especially given the unnaturally large fiscal overreach, which is going to have long term consequences. So why has the President been attacking the Federal Reserve for being too stingy with rate-cuts? As a reminder, the Federal Reserve is meant to as a lever on price stability first, with a secondary goal of “full” employment second. Both goals are essentially non-partisan and rational. Both goals are being generally satisfied.
For supposedly being a non-political entity, the Federal Reserve has been subject to some rather vicious attacks in the past decade. President Trump calls the lead Chairman (which he himself appointed) and his voting members “naïve”, “boneheads”, or just flat-out stupid. Note, this criticism has not been limited to the President – other political candidates and policy heads have challenged the Fed, its current and former Chairmen as acting “treacherous or treasonous”.
President Trump seems to be changing the target of his enmity because any criticism seems unwarranted given the generally good economic backdrop. This morning’s tweets about a “very good and cordial” meeting with Fed Chairman Jay Powell suggest he’ll change his previous course and find a new target instead.