Judy Shelton, a conservative economist whom the Trump administration is considering for a vacancy on the Federal Reserve, said the central bank should avoid restraining growth while the U.S. is engaged in a trade war with China.
“China is able with its state-controlled apparatus to bring everything to bear” including intervening in currency markets and fiscal stimulus, Shelton said Wednesday in a Bloomberg Television interview. “I wouldn’t want the Fed to be a burden and to do the wrong thing at this time and undermine some of the good growth prospects that we have ahead of us.”
Asked if the Fed made a mistake with its last interest-rate increase in December, Shelton said, “by its own admission, we’ve seen almost a complete turnaround, so I think the Fed itself went from being quite inclined to raise as quickly as possible to now rethinking and sitting tight and now even hinting that it could go the other way.”
Shelton said she believes she’s under consideration for one of two open seats on the Fed’s Board of Governors, which would require Senate confirmation, though she declined to offer more details.
President Donald Trump earlier this month called on the Fed to “match” what he said China would do to offset economic hardship being caused by tariffs. Trump has repeatedly criticized the Fed for raising interest rates in 2018 and on April 30, as the central bank met to weigh monetary policy, he urged it to slash borrowing costs by a percentage point and reactivate the Fed’s crisis-era purchase of bonds.
The U.S. central bank has paused rate increases this year amid mixed signals on the strength of the nation’s economy. Unemployment is at a 49-year low but inflation is running under the Fed’s 2% target.
Danger ZoneStill, Shelton cautioned against the Fed taking too aggressive a role.
“I think it would be a little dangerous to want a more activist Fed. I just don’t want them to mess things up,” she said. “And I say that respectfully. But the point is you don’t want to undermine our position or the progress we are making.”
Four previous Trump picks for the Fed withdrew their names from consideration after failing to secure sufficient supporter from senators. The selection earlier this year of two of those candidates, Stephen Moore and Herman Cain, also raised concerns that the president wants to place loyalists on the Fed — which is supposed to be independent from short-term political interference — as he campaigns on his economic record in next year's presidential election. Trump's attacks ignore a nearly 30-year tradition of the White House avoiding public comment on monetary policy out of respect for the Fed's independence.
The White House has a handful of names that the administration is weighing as advisers continue to gather resumes, according to one person familiar with the matter.
Shelton, who was an adviser on Trump's 2016 campaign, holds a Ph.D. in business administration from the University of Utah with an emphasis on finance and international economics. She was previously nominated by Trump to be U.S. director of the European Bank for Reconstruction and Development, a post to which she was confirmed by the Senate in March 2018.
