New York Federal Reserve President John Williams on Wednesday stressed the importance of central bank independence as President Donald Trump looks to exert control over monetary policy.
In a CNBC interview, the influential policymaker avoided commenting directly on Trump’s efforts to fire Fed Governor Lisa Cook but did note the important economic role the central bank plays in maintaining a stable economy.
“Personally, I have worked with Lisa Cook as she’s been a member of the Board of Governors, and she’s always brought integrity and commitment to the central bank’s mission,” Williams said during the “Squawk Box” interview. “I think Federal Reserve central bank independence is very important. … We know from history that independent central banks can deliver low inflation, economic and financial stability.”
During the first year of his second term, Trump repeatedly has pushed against the traditional barrier that has stood between the quasi-governmental Fed and influence from the White House and Capitol Hill.
The president has berated Fed Chair Jerome Powell and his fellow officials for not lowering interest rates. Previously, he has toyed with the idea of sacking Powell before eventually deciding to take on Cook, who faces accusations that she committed mortgage fraud before she became a board member.
Williams said that battle will have to play out in the courts.
“The structure of the Federal Reserve is such that it’s designed to have independent policy makers who are making decisions; longer decisions affect the economy over the longer term, away from short-term political pressure,” he said. “I think that’s really, really important.”
As far as the near-term direction of policy, Williams said it’s likely the Fed will be reducing rates, but he provided no timetable on when that might happen. Markets strongly expect that Federal Open Market Committee, where Williams serves as vice chair and a permanent voting member, will resume lowering its benchmark interest rate in September after spending the year on hold. The current fed funds rate stands at 4.25% to 4.50%.
Williams said he generally views the U.S. economy as strong if slowing a bit, and called the labor market “solid,” a term that many of his colleagues also have been using lately.
“If things move in the way that I hope they do in terms of our maximum employment and price stability goals, then I do think it will be appropriate to move interest rates down over time,” he said. “But we’ve got to be driven by the data.”
Powell said last Friday that he expects rates to come down as well, but also did not specify a timeframe.
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