Janet Yellen warns that Trump's attacks on the Fed are a 'worrisome' undermining of economic stability

AP/Evan Vucci

Federal Reserve Chairman Janet Yellen adjusts her glasses as she testifies on Capitol Hill in Washington, Tuesday, June 21, 2016, before the Senate Banking Committee. Yellen said the U.S. economy faces a number of uncertainties that require the Fed to proceed cautiously in raising interest rates.

• Former Federal Reserve Chair Janet Yellen has launched a stinging attack on President Donald Trump, warning that his public criticisms of the central bank risk undermining "social and economic stability" in the US.
• In an interview with the Financial Times, Yellen said Trump's repeated criticisms could undermine confidence in the Fed, with possibly dire consequences.
• Trump has frequently attacked the Fed, calling its interest-rate hikes "loco," and saying it is the biggest risk to the US economy.
• His opposition to the Fed stems from his dislike of high interest rates.

Former Federal Reserve Chair Janet Yellen has launched a stinging attack on President Donald Trump, warning that his public criticisms of the central bank risk undermining "social and economic stability" in the US.

The Fed is currently moving away from the ultra loose monetary policy it enacted during the financial crisis, and has raised interest rates eight times in the past three years, including three so far in 2018. Trump has a longstanding dislike of high rates, and as such has frequently attacked the central bank, and its current chairman, Jerome Powell, in recent months.

Most recently, Trump criticised the central bank during an interview with the Wall Street Journal this week, bashing Powell and attacking the Fed as the "biggest risk" to the US economy. He has previously said the central bank "has gone crazy" and called its interest-rate hikes "loco."

Speaking to the Financial Times, Yellen made clear her opposition to Trump's position, saying she believes such an approach has "the potential to undermine confidence in the institution [the Fed]."

Trump's criticisms, she added, are "whittling away the legitimacy and stature of institutions the public has traditionally had some confidence in. I feel it ultimately undermines social and economic stability."

This does not just apply to the Fed, Yellen said, but also other major public institutions like the FBI, which Trump has also subjected to frequent vociferous criticisms during his time in the White House.

"If the public has lost confidence in the Fed in a serious way, that will be reflected presumably in congressional actions towards the Fed," she added, suggesting that Federal Reserve independence could be at stake.

"To totally undermine these institutions that are assets to the United States and the globe is worrisome."

Yellen left her post as Fed chair at the beginning of 2018 after serving a four-year term. Prior to Trump's election many believed that she would be granted a second term, but Trump decided to pursue his own head.

Yellen, however, thinks that Trump briefly considered keeping her on at the helm of the central bank. "I have some reason to believe he wondered if it might be a mistake to replace me after meeting with me," she told the FT.

"I think when I walked out of that interview he thought to himself, 'Gee, she is really good and I really like her.'"