Jerome Powell has been sucked into a one-sided communication fight with Donald Trump, who blames the Federal Reserve chairman for losses in the stock market.
Powell can’t match the president’s megaphone on social media. But he can try to prevent equity prices becoming the barometer of Fed success by reminding the public that Congress gave it a different mandate: stable prices, and jobs for as many Americans as possible.
Trump’s Twitter feed is “drowning out the message that the economy is doing well with low inflation and record low unemployment,’’ said Sarah Binder, a senior fellow at the Brookings Institution in Washington.
Since Oct. 3, U.S. equity prices have plunged almost 15 percent, and Trump has put the blame squarely on the Fed. He tweeted on Dec. 18 that central bankers needed to “feel the market’’ and hold off from hiking -- one day before they raised rates. Bloomberg News reported Dec. 21 that the president had discussed firing Powell.
The Fed chief has a chance to snatch the initiative back with public appearances on Friday in Atlanta and Jan. 10 in Washington.
“The burden is on him to come back and say, we are taking everything into account and we are also doing it independently,’’ Diane Swonk, chief economist at Grant Thornton LLP in Chicago. “There is no easy answer here,’’ she said, because the Fed can’t be entirely separated from the causes of stock market volatility.
While investors had expected last month’s rate increase, which showed Powell was willing to defy the president, they were alarmed by projections for two more hikes in 2019. The S&P 500 index fell more than 5 percent from Dec. 19-21.
Not Just Fed
The slide in share prices has many causes, analysts say.
Stocks may have been over-valued relative to a forecast for moderating U.S. and global growth in 2019. Domestic stimulus engineered by Trump in early 2018 will fade in the coming quarters. China and the eurozone both show signs of slowing. The economic outlook could deteriorate further amid Trump’s trade dispute with China and the threat of a disorderly U.K. exit from the European Union.