WASHINGTON (Reuters) - The timing was awkward, at best.
Days after the U.S. Federal Reserve shifted policy along the lines urged by President Donald Trump in a series of critical comments and tweets last year, Fed chairman Jerome Powell turns up at the White House for a steak dinner and an informal audience with the president, seemingly back in his good graces.
But a summons to 1600 Pennsylvania Ave is a staple of life for every Fed chair, no matter how much independence from politics they insist upon or try to convey, with the timing out of their hands and outcomes that can be disastrous but are more typically benign.
If anything was unusual about the Powell-Trump session, it was the context of the president having contemplated just a few weeks ago trying to fire Powell because he disagreed with his monetary policy, and the Fed’s lead role in providing a quick post-meeting statement for the press.
“Readouts” of such meetings are typically left to the White House, but in this case the Fed felt compelled to draw bright lines around what was discussed and what wasn’t, an effort to shield Powell from suggestions that Trump is influencing the Fed’s decisions, and to prevent a fairly normal Washington event from seeming anything otherwise.
Voiced as Powell’s recounting of the meeting, the statement said that he and the president discussed the economy in general, did not discuss upcoming monetary policy, and that Powell told the president Fed decisions were “based solely on careful, objective and non-political analysis,” an odd civics lesson for a chief executive to receive from an appointee.
Timing aside, “it is within the normal operating procedures for presidents to ask Fed chairs for a perspective,” on the economy, particularly with a meeting on the eve of the president’s State of the Union address, said Mark Spindel, founder of Potomac River Capital and co-author of a study of Fed political oversight. “Relative to trying to sack the guy, sitting down to dinner is a non-story.”
The dinner was joined by Powell supporter and Treasury Secretary Steven Mnuchin, and Fed vice chair Richard Clarida, along as what some analysts referred to as a “witness” to the meeting for Powell. The White House has not issued a statement about the session.
The policy changes that the Fed announced last week, indicating an end to the quarterly interest rate hikes Trump has lambasted, have been brewing at the central bank for months, the product of unexpected shifts in economic data and a broader debate about the meaning of recent volatility in financial markets.
The possibility of a face-to-face between Trump and Powell was brought up late last year, as a possible effort to clear the air between the two men after Trump, following a December rate increase, asked aides whether he could fire Powell, and Powell said publicly he would not resign if asked.
The Fed chair, appointed by the president and confirmed by the Senate, serves a four-year term and can only be removed “for cause,” not over a policy disagreement, a provision meant to shield the central bank from short-term political pressure.
Powell is actually behind the pace of his predecessors in meeting with the president, even if the “optics” of the session, so close on the heels of a key Fed decision, were not the best.
During their first year heading the central bank both former chairs Janet Yellen and Ben Bernanke had met twice with the president at the time. Monday night’s meeting with Trump was Powell’s first since taking over as chair a year ago.
Overt pressure to follow a specific monetary policy, such as then-President Richard Nixon’s demands on Chairman Arthur Burns in 1971 for low interest rates, has tended to be the exception.
More common are sessions like Yellen’s visit to the Oval Office in April, 2016 to discuss financial regulation and “the near- and long-term growth outlook” with President Barack Obama, as the White House said in a statement after the event. When Bernanke was summoned to one of four meetings with Obama in 2009, it was to offer him reappointment.
Since incidents like the one with Burns, blamed as it was for touching off rampant inflation in the 1970s, presidents have been more wary about trying to intervene on rate policy. They have been known to whine about the outcome - President George Bush blamed his 1992 election loss on the Fed - but have steered clear of overt Fed-bashing.
That is, until Trump, who has variously called the Fed “crazy,” “out of control,” and “my biggest threat.”
The urge to fire Powell has apparently dissipated, with administration officials assuring markets and the public that the Fed chair’s job was secure. Since late last year people like National Economic Council director Larry Kudlow have raised the possibility of a face-to-face meeting between Trump and Powell to clear the air.
It is an invitation every Fed chair receives, and which cannot easily be turned down.
“Fed chairs do meet with presidents,” Powell said at an early January public appearance. “I’m not aware of any Fed chair in my lifetime that hasn’t met with the president...And I’m not aware of any Fed chair turning down an invitation from the White House, nor do I think that would be appropriate.”
Reporting by Howard Schneider, Additional reporting by Ann Saphir; Editing by Andrea Ricci