Janet Yellen held a pep rally for President-elect Donald Trump on Wednesday when she reluctantly endorsed his economic plan.
The Fed chiefs under President Obama — Ben Bernanke and Yellen — were only able to raise rates twice in eight years, counting Wednesday’s 0.25 percent hike.
Last week, Yellen shocked Wall Street by saying there could be three rate rises next year.
While the economy has failed to expand meaningfully under President Obama’s economic leadership, clearly the Fed expects a completely different trajectory under a President Trump.
The US economy, as measured by gross domestic product, grew an anemic 1.8 percent for the first three quarters of this year. That means President Obama will go down in history as the only president to oversee eight straight years of sub-3 percent annual GDP growth.
Obama did walk smack into the financial crisis, but at this point, eight years later — with rates essentially at zero for his entire term, plus the $4 trillion in quantitative easing stimulus from the Fed — his second four years should have been far more rewarding for everyday Americans. It clearly wasn’t.
“Trumponomics” gripped average Americans by the seat of their pants and said, “Stand tall, this administration is going to work for you.”
Even before taking office or completing his Cabinet nominees, Trump got right to work and cut a deal to keep 1,100 jobs at the Carrier plant in Indiana — just in time for the holidays.
While some say it’s small in aggregate size, I say that was a strong message to every American that he is looking to cut deals that benefit average everyday Americans.
And it was quite a confidence booster for all Americans. The markets, too, have stood tall, with the Dow Jones industrial average setting numerous record highs since Election Day and it is approaching 20,000. The dollar has climbed to a 14-year high as well. A strong currency is affirmation of the underlying economic wave of strength to come.
Main Street Americans are thrilled with the “Trump Bump.” Just look at consumer confidence, which blew away all estimates earlier in the month, coming in at a score of 98. And last week, the NAHB Housing Market Index notched an 11-year high.
Homebuilders are looking forward to fewer regulations in the mortgage and lending markets to get their customers back and get home ownership up from its depressed levels.
In August, home ownership notched the lowest rate since statistics began being reported in 1965.
Trump’s economic policy of lower taxes and lighter regulations for all was crafted by none other than economist Larry Kudlow, who earned his Street cred working at the Federal Reserve and then helping President Ronald Reagan lead the economy to prosperity after President Jimmy Carter’s term.
The similarities of economic shift between the Carter and Reagan administrations and the Obama-to-Trump transition is remarkable, if not outright uncanny.
The Fed has worked under the faux guise of being “data dependent,” yet now, dramatically, without having months of data, or even the proposed presidential policy plans, the central bank is looking at a historic about-face in monetary policy.
The writing is clearly on the wall.
Kudlow is reportedly under consideration for the key spot in Trump’s administration as chairman of the Council of Economic Advisers.
I have gotten to know him over the years and truthfully can’t think of anyone more qualified or more decent person to navigate and lead the economy.
This plum spot has been used as a launching pad for the last three former Fed chairs, Alan Greenspan, Bernanke and Yellen.
Yellen, who is a longtime liberal-leaning Democrat, wouldn’t dare say that Trump’s economic policies are far better. Nor would she give an outright endorsement to his policies of lower taxes and less regulations.
But her actions on Wednesday clearly state that Trump’s election just changed the Federal Reserve’s calculus for 2017.