Miss Me Yet?

Yellen’s successor at the Fed will butt heads with Trump if rate hikes cool growth

- Peter Coy

The long-expected clash between the Federal Reserve and the White House over interest rate policy kept getting postponed over the past year. The stock market climbed, the economy grew, and nothing the Fed did dampened the animal spirits. President Trump got along famously with Fed Chair Janet Yellen.

That calm is emphatically over. Investors have come to believe that the Fed, under new leadership, is serious about raising rates to prevent overheating of the economy—and they’re scrambling to avoid the fallout.

The S&P 500 fell 2 percent on Feb. 2 and 4 percent the next session after the U.S. Bureau of Labor Statistics reported that average hourly earnings for all employees rose 2.9 percent in January from the same month last year—the most since 2009. The strong wage growth raises the likelihood that the Fed will be more aggressive in combating inflation. On Feb. 7, Trump tweeted that the market’s fall was “big mistake” because “we have so much good (great) news about the economy!”

President Trump can’t brush off stocks’ plunge after repeatedly citing their rise as a validation of his presidency. He bragged (correctly) in his State of the Union address on Jan. 30 that “the stock market has smashed one record after another, gaining $8 trillion in value” since he was elected.

If this turns out to be more than a shudder, Trump may start looking for someone to blame.