When Barack Obama was president, Donald Trump lacerated the Federal Reserve for keeping interest rates low and said Fed policy was crushing savers.
Not that’s he’s president, Trump is pushing hard for lower rates himself, with none of the concern for savers he expressed as a 2016 candidate and Obama critic.
For more than a year, Trump has been attacking the Fed for raising rates and hectoring the central bank to reverse course. He finally got his wish in July, when the Fed cut rates by a quarter-point, the first rate cut since 2008. Some interest rates have fallen further since then due to a selloff in stocks and concerns about a global economic slowdown. Mortgage rates, for instance, have fallen back to 2016 levels, after rising for most of the last three years. Savings rates have fallen, too.
This would have been terrible news to the 2016 Trump. “The people hurt the worst are people that saved their money all their lives and thought they would live off their interest,” candidate Trump told CNBC on Sept. 12, 2016. “Those people are getting just absolutely creamed.”
Trump said Janet Yellen, who was Fed chair at the time, should be “ashamed of herself” for keeping rates so low. “She’s obviously political and doing what Obama wants her to do,” Trump griped.
2019 Trump vs. 2016 Trump
The 2019 Trump is infuriated for exactly the opposite reason: The current Fed chair, Jay Powell, won’t politicize the Fed and cut rates as deeply as Trump wants him to. More than that, Trump wants the Fed to expand its own mission and weaken the U.S. dollar, in order to boost exports and give Trump a tactical edge in his poorly managed trade war with China. That would be an unprecedented power grab by the world’s most powerful financial authority, whose Congressionally mandated job is to optimize inflation and unemployment, and nothing more.
Trump says he’s “not happy” with Powell and has publicly mused about firing him—but not because Powell is punishing savers all over again. Savers now seem to be the last people Trump cares about. Trump wants lower rates now because he thinks that would boost stocks and stimulate the economy heading into his 2020 reelection bid. Savers are no longer part of the equation for Trump.
No matter. Trump’s war-on-savers rhetoric in 2016 was a hollow conservative screed when Obama was president and the Fed was administering CPR to a moribund economy. The Fed cut short-term rates to nearly 0 in 2008 (when George W. Bush was still president) and left them there for seven years. The Fed began gradually raising rates in 2015, pushing them up to about 2.5% before the quarter-point cut in July.
When the Fed’s short-term rates were near 0, the average interest rate on a savings account plunged to 0.06%, or six-one-hundredths of a percentage point, according to FDIC data. But the “war on savers” was always a canard, because no rule or law said conservative investors had to keep their money in a bank account earning the lowest possible return. “Savers” were always free to invest in bonds or anything else. And besides, they would have been worse off had a negligent Fed kept rates higher while allowing the recession to become even worse, with higher unemployment and deeper stock-market and home-equity losses. Savers own homes, after all, and many have jobs.
The Fed’s now defunct rate-rising cycle didn’t help savers much. While the Fed’s short-term rates rose from 0% to about 2.5% from 2015 through 2018, the average rate on a savings account barely rose, averaging just 0.1% earlier this year. Rates on CDs did better, rising from 0.2% in 2015 to 0.67% earlier this year, on average, for a 12-month commitment.
Even so, savers are still “getting creamed,” with most people relying on simple bank interest falling behind, after inflation. But nobody wants to help them now. Maybe nobody ever did.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman