Federal Reserve Interest Rates Transcript TV Interviews

Navarro on CNN: Interest rates, Federal Reserve

July 10, 2019 – CNN, Erin Burnett


BURNETT: All right. Just to be clear, president Trump hired Powell. He didn’t inherit Powell. Powell is his guy. But Trump has been angry of Powell’s decision over time to raise interest rates, something Trump thinks could hurt his economic record. But that is not cause to fire the Chief of the most powerful and important central bank on earth because it is independent.

Out front now, Peter Navarro, Assistant to the President and Director of the Office of Trade and Manufacturing Policy. Great to have you with me. I appreciate having you back, Peter. What do you make of what Jerome Powell had to say? He’s pretty clear, President Trump could tell him to leave and he would, of course, not do that.

PETER NAVARRO, WHITE HOUSE TRADE ADVISER: Well, what I heard today from Jerome Powell that was meaningful was the fact that he’s probably going to lower interest rates this month. And let me make the case as to why we in the White House are so disturbed by what Powell has done.

Basically, J Powell when he auditioned for that job he basically promised the President that he would be dovish on interest rates and starting in March of 2018 he did four interest rate hikes of a hundred basis points. Now, if you use the Fed model to basically determine what would happen with that hundred basis points, what we have was an eight percent increase in the value of the dollar.

What does that do? Well, that makes our exports more expensive our imports come in more. We get our trade deficit up. And the Fed’s own models say we lost more than a half a point of growth over time because of this. We lost close to 400,000 jobs and our trade deficit is going to go up by about $170 billion. President Trump …

BURNETT: But here’s what I’m concerned about, when you started to answer my question, you used the word auditioned and promised and those sort of made me really nervous and I think will make a lot of people nervous. The Fed is supposed to be independent. You’re not supposed to make promises to the President as the Fed Chief.

NAVARRO: When a Fed Chairman comes in, when somebody comes in for that job, they should be forthright about what they’re going to do and what they say they’re going to do they should do. But here’s the point, let me finish this point, because this is the point. We have a monitory policy …

BURNETT: But shouldn’t we be watching what’s happening in the economy and doing what the right thing is to do, that’s an independent central bank. NAVARR):” … that is going to cost the American people more than a

half point of growth, a higher trade deficit and close to 400,000 jobs. And what we need to do and what we think the Fed is going to do based on what Jerome Powell said today is start to lower interest rates. Halfway through that, Erin, and you know this well because you used to be a financial anchor, halfway through the Fed’s interest rate hike, the yield curve started to invert.

You could see that clearly. Meaning for your viewers, that the long bond interest rates began to decline signaling very clearly that Powell had made the wrong decision. So my bottom line, I run the office of trade manufacturing policy, this is a president that’s created 5 million jobs, half a million manufacturing jobs, got a million more people in the workforce. Every day he gets up, lives and breathes putting American people back to work particularly those who work with their hands.

And we try so hard everybody and when the Fed makes a mistake by raising interest rates …

BURNETT: Well, look, Peter, there are some though who would argue, of course, that the reason Powell had to change course was because you guys started throwing sanctions and starting a trade war. But can I just ask you, Peter, because look, I hear you …

NAVARRO: Well, that’s another issue. But to finish my point …

BURNETT: … but when Jerome Powell was asked today, hold on, hold on, but I do want …


BURNETT: … because it’s really important. You talked to the President, so you know what he’s thinking.


BURNETT: If you got a call from the President today or tomorrow and he said, “I’m firing you, what would you do?” Powell, “Of course, I would not do that.” Have you talked to the President about his reaction to that, what he thinks about what Jerome Powell just said and he …

NAVARRO: No, I haven’t.

BURNETT: … basically just told him to go and take a hike.

NAVARRO: Look, my role here from a policy point of view is to point out what the implications of J Powell raising interest rates by a hundred basis points from March through December of 2018. It’s going to cost us more than a half a point of growth, close to 400,000 jobs and it’s going to spike our trade deficit.

And what it does is it undos all of the good things we are doing in terms of trade policy, tax policy and regulatory policy. So we can’t fight the Fed. We don’t want to fight the Fed. And let’s be encouraged by what Jay Powell said today. Clearly, the markets interpreted his remarks as the Fed likely to cut interest rates in July. I hope he goes 50 basis points.

[19:25:00] BURNETT: Yes, it did – the market went up today, first time ever over 3,000.

NAVARRO: And what we’re about, Erin, what we’re about at that White House and this is very different from any president in many, many decades. We’re about creating good jobs and good paying wages. We have the lowest unemployment rates for women, blacks, Hispanics and the general population.

We got rising wages and the Fed Chairman is trying to undo that so we get a little annoyed with the Fed Chairman when he doesn’t read the tea leaves correctly, full stop.

BURNETT: I think though that many would take issue and rightfully so with you trying to characterize it. The Chairman of the U.S. Federal Reserve was saying he’s trying to undo economic growth in the United States that in and of itself is a kind of a bizarre thing to say, don’t you think?

NAVARRO: Well look, clearly, Erin, he raised hundred basis points from March through December and the yield curve in …

BURNETT: He’s trying to do what he think is the right thing. He’s not trying to undo and hurt the economic, right?

NAVARRO: Look, it was either a rookie mistake or he’s not fit for the job. He’s not an economist, that’s for sure. A hundred basis point hikes. The dollar goes up by eight percent and it’s going to cost us half a point of growth or more and hundreds of thousands of jobs that’s not good for the American people.

I think he’s got the message. Wall Street’s given him the message. His own members of the Board of Governors have given him the message. The president has given him the message. He was very dovish today and I think moving forward I think we can have a good outcome.

BURNETT: OK. Do you think part of the problem though is the sanctions and the trade war that you all have. The talk that you’ve been doing that has caused the economy to weaken and thus caused Powell to have to move the other way? Even on your radar to consider that that’s the way it’s going?

NAVARRO: There’s nothing that suggests that the economy has weakened. We had record numbers on the unemployment rate. But what I like to do as Wayne Gretzky said is skate to where the puck is going to be. I worry when the Fed raises rates too high and our currency gets overvalued and that hurts our exporters.

So I’m worried about what’s going to happen in the next two, three, four quarters the next year if the Fed is making rookie mistakes like that. So again I think we’re back on track, the Fed was – and Powell was encouraging today, but we can’t make those kinds of mistakes. He has an important job and he made a mistake. I think everybody believes – I don’t know anybody who’s defending what he did – that they defend the independence of the Fed, but nobody is defending J Powell for raising rates to 100 basis points.

You find that person and show them to me because I can’t find them. So he made that mistake and the American people have to live with that. But again let’s be encouraged, Erin, by his testimony today.

BURNETT: And I’m also curious, Peter, to see what the President has to say. I mean J Powell did tell him to take a hike today. He said, “Go ahead and fire me, I will not leave.” Which understand you said that’s not what matter about what he said today.

NAVARRO: Well, I can assure that the President is not going to do what J Powell tells him to do.

BURNETT: But I will tell you, I think it matter.

NAVARRO: Yes. Well, it’s nice to talk to you, Erin.

BURNETT: All right. Thank you very much. I appreciate Peter. It’s always good to have you with me.

NAVARRO: My pleasure.