GOP senator seeks hearing on Fed independence after Dudley op-ed

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A Republican member of the Senate Banking Committee called for the panel to hold a hearing on what he termed the danger that the Federal Reserve will meddle in the 2020 presidential election, a day after a former top central bank official suggested that the Fed resist interest-rate cuts that would aid Donald Trump.

Sen. Thom Tillis of North Carolina said Wednesday that he was “very disappointed” that former New York Fed President Bill Dudley appeared to be “lobbying the Fed to use its authority as a political weapon against President Trump,” according to an emailed statement.

“The president is standing up for America against China after 30 years of our country and our workers being ripped off and there is now an effort to get the Fed to try to sabotage the president’s efforts,” Tillis said. He called for a hearing “regarding Fed independence and the danger of this institution taking unprecedented and inappropriate steps to meddle in the presidential election.”

Dudley on Tuesday suggested in a Bloomberg Opinion piece that the central bank resist interest-rate cuts that would help Trump’s re-election prospects. He drew swift criticism from analysts and economists that such an approach would jeopardize the independence of a Fed already under fierce attack from the U.S. president.

“Trump’s re-election arguably presents a threat to the U.S. and global economy,” wrote Dudley, who headed the New York Fed from 2009 to 2018 and served as vice chairman of the rate-setting Federal Open Market Committee. “If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.”

The Fed issued a statement Tuesday in response to Dudley’s column, rejecting the suggestion that it would play politics with monetary policy. “The Federal Reserve’s policy decisions are guided solely by its congressional mandate to maintain price stability and maximum employment. Political considerations play absolutely no role,” Fed spokeswoman Michelle Smith said.

Bloomberg News