President Trump should use the occasion of his upcoming State of the Union address to call for legislation reforming the Federal Reserve System and for examining alternative ways to conduct monetary policy.
The path is open for the Fed to reverse course on its recent rate hikes. But what if the economy does not respond as intended? What if, as in Japan’s experience, the interest rate tool becomes ineffective when it is close to zero?
The Fed needs to modify its current interest rate and asset drawdown policy.
The president is right to be concerned. Excessive Fed hawkishness right now is a serious danger to the economy.
Monetary reform is not a grassroots issue. What is needed is a president who intuitively grasps the interests of those who would benefit the most from a stable dollar.