Fed’s independence backed by Greenspan

Donald Trump’s surprise victory in the US presidential race raises new questions over Federal Reserve policy in the short run and the central bank’s vital operational independence over the longer term.

“We are in a big, fat, ugly bubble. And we have a Fed that’s doing political things, this Janet Yellen of the Fed,”

“The day (President Barack) Obama goes out … to the golf course for the rest of his life to play golf, when they raise interest rates, you are going to see some very bad things happen,”

-Trump charged during the campaign.

Mr Trump has accused Ms Yellen of keeping interest rates low to help the Democrats, leading to speculation that she might now resign.

However, Alan Greenspan told the BBC’s Newsnight that the Federal Reserve should not react to politics.

Ms Yellen could only be removed from office if she was impeached, he said.

Mr Greenspan, who served as Fed chairman between 1987 and 2006, said his initial reaction to Mr Trump’s victory had been “shock”.

“I didn’t vote for anybody for president. I’m a lifelong conservative Republican and it’s the first time I didn’t vote. I couldn’t vote for Hillary Clinton and Donald Trump was not my candidate,”

-he added.

On Newsnight Mr Greenspan was asked what he thought would happen to the relationship between the presidency and the Federal Reserve now.

‘The Federal Reserve is an independent operator and should not be involved in politics nor react to politics,” .

“So the fact that Trump dislikes Janet Yellen, thinks she’s doing things incorrectly, I think it’s up to Janet Yellen just to disregard it. The only way she can be taken out of office is by a very complex impeachment,”

-he added.

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