White House economic adviser and Director of the National Economic Council Larry Kudlow slammed former New York Fed president Bill "Deep State" Dudley, who wrote in a stunning Bloomberg op-ed that the central bank should avoid cutting interest rates in order to soften the economic impact of President Trump's trade war with China.
"With respect to Bill Dudley, whom I have known for many years, Bill Dudley went over the cliff," Kudlow told Bloomberg Television's Jonathan Ferro on Friday, adding that Dudley was politicizing the independent Fed - while arguing that President Trump's constant criticism of Fed chairman Jerome Powell don't amount to the same interference.
"That is the most politicized statement I have ever heard," Kudlow said.
Dudley sparked swift criticism after writing a Bloomberg Opinion column on Aug. 27 suggesting that the Fed reject interest-rate cuts that would help Trump’s prospects for re- election in 2020. Dudley argued the central bank would risk enabling further escalation by the president in the trade war with China and said that officials should state explicitly that they “won’t bail out an administration that keeps making bad choices on trade policy.” -Bloomberg
Dudley backpedaled in a September 4 follow-up, claiming that he doesn't think the Fed should attempt to influence the 2020 US election through monetary policy, while insisting "There is no “deep state” or conspiracy that I am part of."
He tried to explain that the combination of the trade war and the president’s attacks on the Fed "threatened to put the central bank in an untenable position", one where Trump was shifting responsibility for the downside risks from his trade war onto the Fed. "I thought this was an important issue worth exploring," he said.
Kudlow called Dudley's op-ed and follow-up as "utter nonsense" and a "new low."
"I’ve never seen anything like the Dudley statement," he said, adding "There is no excuse or defense for it."
Kudlow said his own conversations made clear that the Fed board was “horrified” by Dudley’s op-ed. Trump has regularly criticized the Fed, called for lower rates and lamented being stuck with Powell. Earlier Friday, Trump tweeted: “Where did I find this guy Jerome? Oh well, you can’t win them all!”
"The market is telling us the Fed’s going to lower rates in September and October. I think that’s a good thing," said Kudlow, adding "In any event, the Fed is professional, they are independent, they’re going to do what I think they need to do, and that’s going to help the economy."
The next Fed meeting will be Sept. 17-18 in Washington.