(Bloomberg) -- White House chief economic adviser Larry Kudlow called on the Federal Reserve to “immediately” cut interest rates by a half percentage point, escalating the Trump administration’s fight with the central bank and challenging its independence.
Kudlow “would love to see” such a move, according to a report by Axios, which cited an interview Friday with the director of the National Economic Council. Later on CNBC, Kudlow said a rate cut would protect the strength of the U.S. economy from weakness abroad, though he said such a move isn’t needed immediately and the “underlying economy” isn’t slowing.
The comments follow a report saying Stephen Moore, whom President Donald Trump plans to nominate to the Fed’s board, also advocated a half-point cut. Fed policy makers last week projected they would keep interest rates on hold for the year, compared with their December forecast for two rate hikes, as slowing global growth weighs on the U.S. economy. The Fed’s target benchmark rate stands in a range of 2.25 percent to 2.5 percent.
Fed spokesman David Skidmore declined to comment on Kudlow’s remarks, which came days after Moore told the New York Times that the central bank should cut rates by a half point.
Moore is a conservative pundit and supporter of the president who co-authored the book “Trumponomics: Inside the America First Plan to Get Our Economy Back on Track.”
The central bank raised borrowing costs four times last year, provoking harsh rebukes from Trump, who Bloomberg News reported Dec. 21 had also discussed firing Fed Chairman Jerome Powell.
Trump’s criticism -- in interviews and on Twitter -- disregarded long-standing White House practice of avoiding public comment on monetary policy out of respect for the Fed’s independence, which is an article of faith among investors who purchase U.S. Treasuries. Kudlow’s direct demand for a rate cut took things up a notch.
“It’s more than poor form, it crosses a line,” said Diane Swonk, chief economist at Grant Thornton in Chicago.
Swonk said she’s confident the Fed under Powell will continue to ignore White House pressure when making monetary policy decisions, but Kudlow’s remarks help chip away at the central bank’s independence.
“If it’s OK for one White House to do it, maybe it’s OK for another White House to do it, and over time that may have a cumulative effect,” she said. “We know that countries that allow their central bank to be run by the political whims of those governing do extremely poorly over time.”