Former Fed Chair Janet Yellen says Trump doesn't understand the Federal Reserve or economic policy

Bob Bryan

Feb 26, 2019, 02:44 IST

Former Fed Chair Janet Yellen says Trump doesn't understand the Federal Reserve or economic policy

Carlos Barria/Reuters; Composite by Bob Bryan/Business Insider

A composite image of President Donald Trump (left) and former Fed Chair Janet Yellen (right).

Former Federal Reserve Chair Janet Yellen told Marketplace that President Donald Trump doesn't understand economic policy.
Yellen, now at the Brookings Institution, also said Trump's focus on the US-China trade deficit is misguided.
The former Fed Chair said Trump's attacks on current Fed Chairman Jerome Powell are detrimental to the public's confidence in the central bank.

Former Federal Reserve Chair Janet Yellen gave a harsh critique of President Donald Trump's economic knowledge in an interview published Monday.

Yellen, who left the Fed in 2018, told Marketplace's Kai Ryssdal that the president doesn't understand the basics of the Fed or macroeconomics.

"Do you think the president has a grasp of macroeconomic policy?" Ryssdal asked.

Yellen's reply was short: "No, I do not."

Yellen pointed to two topics, the Fed's dual mandate and the US-China trade relationship, as examples of where Trump falls short.

The former Fed Chair said Trump did not seem to understand the Fed's dual mandate - the two key goals that the central bank is trying to achieve - of price stability and maximum employment.

"Well, 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 to the Fed," Yellen told Marketplace.

Yellen, who is now a distinguished fellow in residence at the Brookings Institution, also criticized Trump's focus on the bilateral trade deficit with China. The president has made reducing the US-China trade imbalance a key goal for the ongoing trade negotiations.

"And when I continually hear focus by the president and some of his advisers on remedying bilateral trade deficits with other trade partners, 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 told Ryssdal.

Trump passed over Yellen for a reappointment in 2018, instead tapping Jerome Powell to lead the central bank. According to a report from the Washington Post, one of the reasons for Trump's decision to move away from Yellen was because the 5-foot-3-inch economist was not tall enough.

Yellen has previously criticized the president's public attacks on the Fed and Powell's decision to increase interest rates. The former Chair raised those issues again in the interview.

"President Trump's comments about Chair Powell and about the Fed do concern me," she said, "because if that becomes concerted, I think it does have the impact - especially if conditions in the US for any reason were to deteriorate - it could undermine confidence in the Fed. And I think that that would be a bad thing."