Yellen and Trump - Partners or Adversaries

The New York Times and the Wall Street Journal have different takes on how Janet Yellen’s Fed will affect the Trump administration.  The NYT says in a front page story:

The Fed’s assessment that the economy is growing at a healthy pace — not too hot, not too cold — is starkly at odds with Mr. Trump, who has promised 4 percent growth and has described job creation as “terrible” and economic growth as anemic.

Already on Wednesday, one Republican member of the House Financial Services Committee, Representative Roger Williams of Texas, criticized the Fed’s move.

“Today’s decision by the Fed to raise the interest rate is entirely premature and will be burdensome to a nation already struggling to pull itself out of this slow-growth Obama economy,” Mr. Williams said in a statement. “By making rates even higher, the Fed is effectively making our hardships even harder.”

Mr. Williams did not object when the Fed raised rates last December.

Meanwhile the WSJ says:

For at least the next year or two, the interests of Mr. Trump and Fed Chairwoman Janet Yellen are closely aligned. He wants low unemployment and faster economic growth, and she’s happy to err on the side of both via the most docile course of interest-rate increases on record, so long as inflation stays low.

So, which is it?  I think they are a little bit at odds, mainly because Yellen decided to raise rates on the eve of Trump’s inauguration, after threatening to do so for over a year, and not doing it.  A quarter of a point increase is not much, and probably won’t matter much to the economy, but it’s a signal.  Ultralow interest rates have encouraged speculation in the stock market, driving up stock prices,  In theory raising rates now should depress stock prices and bond prices.  It should remove some of the speculation from the stock market, and higher interest rates should depress bond prices.  But recently nothing seems to follow old-fashioned rules; so, who knows what the effect will be.  For sure some speculative investors will guess right and will make some money.  That is where I worry about some Jewish connection that will benefit them, even it it’s only subliminal.  

A more normal, predictable financial situation gives speculators less of an advantage over ordinary investors, who are just saving to buy a house or pay for college, rather than make a billion dollars in a hedge fund or private equity.  Of course Trump ran as the champion of the common man, but has chosen a cabinet of billionaire speculators.