William Dudley, former president of the Fed's New York regional bank, faced a barrage of criticism from economists across the political spectrum for a column published in Bloomberg Opinion Aug. 27. In it, he argued that the Fed shouldn't "enable" Trump's trade war by cutting interest rates.
On Wednesday, he specified in a second column that he does not think the Fed should attempt to influence the 2020 election. But he reiterated his criticism of Trump's attacks on the Fed and said it should explicitly say that Trump's trade war is the "greatest risk" to the economy.
Dudley acknowledged that his initial column "elicited an intense and often critical reaction." Former Treasury Secretary Larry Summers, for example, said in an interview on CNBC that Dudley's comments were "grossly irresponsible" and "an abuse of the privilege of being a former Fed official."
But Dudley did not back away from much in his original column. In his second column, he said that "the Fed needs to be cautious that it does not inadvertently enable the president's trade war with China."
The Fed cut short-term interest rates at its last meeting in July, a step intended to stimulate the economy and that could offset negative consequences from Trump's tariffs on Chinese imports. Most economists forecast that the Fed will cut rates again at its next meeting in two weeks.
The most controversial aspect of Dudley's initial column was his statement that "Trump's re-election arguably presents a threat to the U.S. and global economy, to the Fed's independence and its ability to achieve its employment and inflation objectives."
"If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020," he wrote. On Wednesday, however, he said, "the Fed should never be motivated by political considerations or deliberately set monetary policy with the goal of influencing an election."