A12| Monday, August 19, 2019 ** THE WALL STREET JOURNAL.**
Jerome Powell, chairman of the Federal Reserve, at a July 31 news conference.ANDREW HARRER/BLOOMBERG NEWSSouth Koreans hold up signs denouncing Japanese Prime Minister Shinzo Abe during a National Liberation Day rally on Thursday.JUNG YEON-JE/AGENCE FRANCE-PRESSE/GETTY IMAGESpressed some reluctance to cut
rates leading up to the July
30-31 meeting, largely because
they felt the U.S. economy
didn’t need such a boost, ac-
cording to interviews and pub-
lic statements. At the same
time, there was little support
at the meeting for a rate cut
larger than a quarter point.
Boston Fed President Eric
Rosengren, who dissented in
last month’s rate decision, said
a diversity of views at the Fed
is natural given the uncer-
tainty over trade.
“If I assume no change in
trade policy, and somebody
else assumes a trade war that
reduces both business and
consumer confidence, even
though the data has been the
same, we’ll get a very different
forecast,” he said in an inter-
view before the July 30-
meeting.
Mr. Powell mentions trade
policy in public remarks, but
he has avoided any judgments
about Mr. Trump’s decisions.
“We’re not in any way criticiz-
ing trade policy,” he said at his
July 31 news conference.
“That’s really not our job.”
Many of Mr. Powell’s col-
leagues will be at the JacksonHole conference this week,
where he and his top lieuten-
ants are expected to begin
forging a consensus ahead of
the Fed’s Sept. 17-18 meeting.
Absent a crisis, Fed officials
tend to make big policy moves
with caution, making for a cul-
ture that is testing Mr.
Trump’s patience.
“The chair’s got a very diffi-
cult job. It’s not only looking
at the data.... It’s also getting
the committee to the right po-
sition in a consensus fashion,”
said Mr. Evans, the Chicago
Fed president, who supported
last month’s rate cut. “It works
better when we’re all together
on this, as long as we don’t de-
lay too much.”
Mr. Powell and his top lieu-
tenants, Vice Chairman Rich-
ard Clarida and New York Fed
President John Williams, have
led the Fed to cut rates before
economic data showed conclu-
sive evidence of a slowdown.
The Fed leaders have cited
research that said when offi-
cials were faced with little
room to lower interest rates
because they are already close
to zero, they should use the
limited ammunition they have
early and fast.The leaders didn’t signal
more aggressive action after
last month’s meeting because
they didn’t see enough evi-
dence of a slowdown to signal
alarm. They also ran up
against resistance among their
colleagues.
Several regional bank offi-
cials feared that prematurely
providing stimulus to an econ-
omy that continued to see
steady hiring and consumer
spending risked fueling finan-
cial bubbles and other trou-
bles.
To seek agreement among
his Fed colleagues, Mr. Powell
blocks out more than one day
on his calendar to meet or
speak by phone with all 12 re-
serve bank presidents and the
four Fed governors before ev-
ery meeting of the rate-setting
Federal Open Market Commit-
tee.
During the group’s discus-
sions, Mr. Powell isn’t in “sell
mode,” said Richmond Fed
President Thomas Barkin.
“He’s very much in listen
mode.”
Mr. Barkin spent a 30-year
career at McKinsey & Co., the
management consulting firm,
where he served in seniorFed Up
President Trump selected FedChairman JeromePowell to the lead the central bank beginning
in February 2018. Mr. Trump has kept up a drumbeat of commentary and criticism ever since.Sources: WSJ analysis of Trump comments; Federal ReserveNDJFMAMJJASONDJFMAMJJA
2017 2018 2019Trump
dines
with
PowellThe Fed is going wild. I mean, I
don't know what their problem is.The Fed is like a powerful
golfer who can’t score
because he has no
touch—he can’t putt! If the Federal Reserve
ever did a “match”
(with China), it would
be game over, we win!As usual,Powell
let us down.They’re making a mistake because I have a
gut, and my gut tells me more sometimes
than anybody else’s brain can ever tell me.The Fed is going loco and there's
no reason for them to do it.
—Oct. 10, 2018—Nov. 27, 2018—Dec. 24, 2018—May 14—July 31Trump’s public mentions
of the Federal ReserveFederal Reserve raises interest rates Federal Reserve lowers interest ratesFROM PAGE ONE
ness and at the Fed say the
president’s own trade policies
have triggered market jitters
and slowed business invest-
ment.
Some analysts said Mr.
Powell has at times confused
markets over the Fed’s plans.
His push to raise interest rates
in December, and his defense
of further increases, added to
year-end market volatility. In
hindsight, these analysts said,
it was a mistake. Mr. Powell
led his colleagues to reverse
course within weeks.
The stakes are high all
around. Wall Street forecasters
have raised their odds of a re-
cession, and the state of the
economy in 2020 will influ-
ence Mr. Trump’s reelection
effort.
“I think our economy is
very, very good,” Mr. Trump
said Sunday. “If it slowed
down,itisbecauseIhaveto
take on China and some other
countries.”
The president ripped Mr.
Powell as “clueless” after mar-
kets dropped last week, the
latest in a string of disparag-
ing remarks from Mr. Trump
since appointing Mr. Powell to
lead the Fed. Mr. Trump has
lauded economic systems, such
as in China, where central
banks are under tight control,
a view that has raised worries
among current and former Fed
officials.
“He’s made clear in various
interviews and tweets that he
doesn’t believe that the Fed
should be independent,” for-
mer Fed Chairwoman Janet
Yellen said of Mr. Trump last
week during an interview on
Fox Business Network’s “WSJ
at Large” program.
The president’s attacks “for
any Fed chair would be a rea-
son to feel stress,” Ms. Yellen
said. “But you know I admire
what Chair Powell has been
doing. I think that he has tried
to tune it out.”
Fed officials see their inde-
pendence as critical to markets
and the economy.
The central bank raised
rates four times last year be-
cause the unemployment rate
was falling, and inflation
reached the Fed’s 2% target.
Officials broadly supported the
ContinuedfromPageOne
South Koreans have
amassed lists of Japanese
products online, suggesting
domestic alternatives to Hello
Kitty dolls, cat food and choco-
late. Boycotters recommended
replacing Japanese anime-re-
lated merchandise with Pororo,
a popular South Korean pen-
guin character who dresses
like a pilot. Boycotters can
download apps that provide
suggestions on the go.
South Korea’s beauty queens
won’t travel to Tokyo for an in-
ternational competition. Japa-
nese racehorses aren’t invited
next month to an international
event, with the Korea Racing
Authority citing “national sen-
timent” as a reason.
Relations between Japan
and South Korea have dipped
to the worst levels in decades,
in the midst of an escalating
trade fight that began last
month. Japan curbed some
tech-related exports to South
Korea in July and later
dropped South Korea as a fa-
vored trading partner. Seoul
took a similar move against
Tokyo last week.
The dispute follows clashes
between the two governments
over reparations related to
Japan’s occupation of South
Korea from 1910 to 1945, in-
cluding for Japan’s use of so-
called comfort women and
forced Korean labor.
Jeong Ji-won, 33, was
headed out one day, and
ContinuedfromPageOne
thought about wearing a pair
of white sneakers made by
Osaka-based Descente Ltd. He
thought the shoes, which had
gone unworn for the past
month, would have paired
nicely with his white long-
sleeve shirt and gray shorts.
He ultimately reached for his
white Nikes.
“When Japan apologizes
and retracts the trade restric-
tions, I’ll wear the Descente
sneakers again,” Mr. Jeong
said.
After last month’s release of
“Butt Detective the Movie,”
South Korea’s netizens flooded
websites with bad reviews andurged others to avoid the film.
The children’s animated film
from Japan, based on a popu-
lar comic, stars a detective
whose face resembles a rear
end. The film flopped.
In Seoul on Thursday—the
country’s National Liberation
Day, marking the end of Japa-
nese colonial rule—thousands
joined a protest, holding signs
reading “No Abe! No Japan!” in
reference to Prime Minister
Shinzo Abe. Some wore white
T-shirts that proclaimed, “I
couldn’t fight for Korea’s inde-
pendence but I will join the
boycott!”
South Korean PresidentMoon Jae-in, mentioning
Japan’s trade restrictions in a
recent national address on
Thursday, praised “the Korean
people’s mature response to
Japan’s economic retaliation.”
As recently as the 1970s,
South Korea had a lower per
capita income than North Ko-
rea. The country has sought to
engineer an economic revival
by borrowing some lessons
from Japan, including in man-
ufacturing. The two also
shared close ties in culture,
food and travel.
Unlike in prior clashes,
South Koreans now have
enough purchasing power andlocal alternatives to deliver a
significant blow to Japanese
businesses, said Chun Woo-
yong, a professor at the Acad-
emy of Korean Studies.
A senior Japanese official
said Thursday he expected the
South Korean boycott to have
a small economic impact. Even
after Samsung Electronics Co.
leapfrogged Sony Corp., and K-
pop trumped J-pop, Japan’s
gross domestic product is
three times that of South Ko-
rea’s.
The trade-offs are simple
enough for Yoo Ji-woong, a
24-year-old college student. He
has recently avoided 7-Elevenconvenience stores—owned by
a Japanese retailer group—
opting to walk an extra five
minutes to support a South
Korean-owned rival.
Local Starbucks Corp. shops
have stopped ordering Japa-
nese blends such as prepack-
aged matcha lattes. A South
Korean YouTuber issued an
apology for referring to rice
cakes as mochi , a Japanese
term, instead of using the Ko-
rean word of ddeok.
A photo circulated on social
media of a banner for a sa-
shimi restaurant, saying it
would refuse Japanese cus-
tomers altogether.
Joung Ha-yoon, a 29-year-
old banker, had planned to
travel to Japan for summer va-
cation. Three weeks ago, she
ditched those plans and went
to Hong Kong, where she
chose local beers instead of
her favored Japanese Asahi.
Until the trade fight ends, she
has committed to suppressing
her cravings for a Japanese
tripe stew called motsunabe.
That wasn’t too much of a
sacrifice, she said. “You can’t
even upload pictures of Japa-
nese food on social media any-
way.”
Sitting over a plate of
salmon sushi rolls recently,
Han Ji-soo, a 27-year-old food
and travel blogger, has seen
how the online reaction about
anything Japan, including her
prior trips, has become a sen-
sitive issue.
“Now is not the time to pro-
mote anything Japan,” said
Ms. Han, pushing the salmon
roll into more favorable light-
ing. She still planned to blog
about her sushi lunch, but “I’ll
have to clarify that this place
is owned by Koreans.”
—Chieko Tsuneoka
contributed to this article.decision because they expected
inflation to continue rising this
year. The Fed shelved plans to
keep raising rates after infla-
tion unexpectedly softened and
market volatility soared at the
end of 2018.
This year, uneven economic
developments have “called all
of us to look and wonder...did
we just get it wrong last
year?” said Chicago Fed Presi-
dent Charles Evans.
“Or is it that our assess-
ment of how the economy”
would grow has become “more
challenged by some of the un-
certainties businesses are fac-
ing” from trade, Mr. Evans
said.
Fed officials and private
forecasters say Mr. Trump’s
trade policy is complicating
their task.
Twice this year, in early
May and after the Fed cut
rates on July 31, Mr. Powell
sought to express the view
that Fed actions were enough
to keep the U.S. economy ex-
panding, a pushback against
investor appetite for more
stimulus.
Both times, Mr. Trump
within days intensified trade
tensions, throwing the Fed’s
economic outlook into doubt.
Last month, the Fed cut
rates by a quarter percentage
point to a range between 2%
and 2.25%, citing risks from
slower global growth and un-
expectedly soft inflation.
Thenextday,onAug.1,Mr.
Trump announced plans to im-
pose 10% tariffs on $300 bil-
lion in Chinese imports that
weren’t already subject to 25%
tariffs, a significant escalation
in the U.S.-China trade dispute
that rattled markets.
“It has become very diffi-
cult on a day-to-day basis to
predict exactly where the ad-
ministration is going to be on
its policies, or what the next
tweet is going to be,” said Na-
than Sheets, chief economist at
PGIM Fixed Income. He previ-
ously held senior posts at the
Fed and in the Treasury De-
partment during the Obama
administration.
Economic forecasts always
have a margin of error, he
said, “but this is a qualita-
tively different task, one that
the Fed is not trained to deal
with.”
Weak economic data from
Germany and China last week
triggered a stock-market sell-
off and a bond-market rally,
with yields on 30-year Trea-
sury bonds falling to their low-
est levels ever.
The reaction illustrated the
growing sensitivity of inves-
tors to worries about trade
tensions and global growth.
Complicating matters, Mr.
Powell has to forge a consen-
sus. The central bank’s policy-
making group was more di-
vided last month over his push
to cut rates than at any other
time in his 18-month tenure.
Half of the group’s 12 re-
gional Fed bank presidents ex-roles, including finance chief.
“I don’t think most corpo-
rate CEOs would like his job
very much—or maybe even do
his job in the same way,” said
Mr. Barkin. “The group has to
respect that you understand
the debate, the challenges—
that you’ve got a quality of
thinking that they are willing
to follow.”
Mr. Powell’s job security has
become a regular topic of con-
versation on trading desks. Mr.
Trump has claimed the author-
ity to replace the Fed chair if
he chooses, a legal question
Fed officials dispute.
The president tapped Mr.
Powell for his post in Novem-
ber 2017 and has selected four
of the five current Fed gover-
nors.
Mr. Trump’s frustration
with those officials this spring
led him to announce plans to
name more partisan loyalists,
and central bank critics, to the
Fed’s board.
Two of the president’s
picks, Stephen Moore and Her-
man Cain, withdrew from con-
sideration after Senate Repub-
licans indicated they weren’t
likely to win confirmation. Mr.
Trump has since said he would
nominate two others.
Mr. Powell, a 66-year-old
lawyer and former private-eq-
uity executive who served in
the Treasury Department un-
der President George H.W.
Bush, has met privately with
members of Congress to build
support.
The Fed chief has said he
won’t allow decisions to be in-
fluenced by anything other
than economic analysis and
the central bank’s mission to
boost employment and main-
tain stable prices. “We’re hu-
man. We’ll make mistakes,” he
told a New York audience in a
speech this summer. “But we
won’t make mistakes of integ-
rity or character.”
Mr. Trump hit back the next
day. “He’s trying to prove how
tough he is because he’s not
going to get pushed around,”
Mr. Trump said on Fox Busi-
ness. “Here’s a guy, nobody
ever heard of him before, and
now, I made him, and he wants
to show how tough he is.”
Last month, Mr. Powell said
he wouldn’t leave the Fed if
Mr. Trump sought to terminate
his four-year term, foreshad-
owing a potential legal fight.
Any court battle about exec-
utive authority over the Fed
chair could take weeks or
months, but the negative mar-
ket reaction would probably be
swift, said former Fed gover-
nor Sarah Bloom Raskin, now
at the Duke University School
of Law.
Rep. Maxine Waters (D., Ca-
lif.), chairwoman of the House
Financial Services Committee,
asked Mr. Powell whether he
would pack up and go if or-
dered by Mr. Trump.
“Of course, I would not do
that,” Mr. Powell replied. “My
answer would be ‘No.’”Trump
Targets
Fed Chief
Hello Kitty
Bids a
Fa rewel l
Fed officials fight
recession fears and
withering White
House criticism.