Trump Could Keep Yellen From Raising Rates

Yesterday, during an interview with CNBC, Donald Trump said that he would most likely replace Janet Yellen, stating:

“She is not a Republican, When her time is up, I would most likely replace her because of the fact that I think it would be appropriate.”

That would be when Yellen’s term as chairwoman ends in February 2018.

Okay that’s great, but if Trump is looking to get elected, the best thing that he could do for himself would be to encourage her to raise the rates. 

By telling her, “Hey Janet, when I’m elected, you’re fired” doesn’t incentivize her to raise the rates. Simply because higher rates hurts the incumbent party in office because higher rates are usually synonymous with an economy that is on the verge or in the process of rolling over. It is lower rates that are “supposed” to help the economy grow, though granted, the economy since the 2009 bottom in the stock market doesn’t look so hot outside of the stock market itself, and if it wasn’t for quantitative easing here and around the world, the market would undoubtedly be much lower too. 

So if the rates are higher, the greater strain it puts on the economy – just look at what happened in the stock market after the Fed raised rates for the first time last December just a quarter point – absolute mayhem followed. 

So if you are Yellen, and you want to keep your job, you don’t raise rates until after the election, because that gives you the best chance of keeping your job under another Clinton presidency. If you raise rates like you said you would back in December, you are increasing Trump’s odds of taking the White House and signing your own pink slip.