US Fed should help defeat Trump in 2020: ex-Fed member

A former top US central banker leapt into the political fray on Tuesday, calling on the Federal Reserve to consider reducing President Donald Trump's chances of being reelected next year.

Bill Dudley, the influential former president of the New York Federal Reserve Bank, also said in a Bloomberg opinion column that the Fed should declare that it will not "enable" Trump's trade war by lowering interest rates.

The stunning arguments flew in the face of current Fed officials' efforts to maintain political neutrality despite Trump's year-long pressure campaign to demand easier monetary policy.

Trump last week called Fed Chairman Jerome Powell an "enemy" and on Tuesday tweeted that policymakers loved "watching our manufacturers struggle" to export to markets with easier monetary policy.

The barbs were just the latest of the president's attacks on a central bank he accuses of failing to deliver needed economic stimulus.

Powell has attempted to brush off Trump's near-daily invective, saying Fed officials do not take politics into account when deciding on policy.

Investors overwhelmingly expect the Fed to deliver a 25-basis-point cut to interest rates next month as the global economy slows and the US-China trade war drags into its second year.

But Dudley, the former vice chairman of the Fed's rate-setting Federal Open Market Committee, said in his Tuesday op-ed that such a move could encourage Trump to escalate a "disastrous" trade war with China, which deteriorated sharply last week.

"The central bank's efforts to cushion the blow might not be merely ineffectual. They might actually make things worse," he wrote.

Clearly stating that the Fed will not cut rates would send the signal that Trump will own the risks created by the US-China trade war -- "including the risk of losing the next election," he said.

Dudley went further, saying that the outcome of the 2020 presidential elections was arguably "within the Fed's purview" because a second Trump term represented a threat to the global economy as well as the Fed's political independence and policy mandates.

"If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020," he wrote.

Dudley stepped down as New York Fed President last year and is currently a senior research scholar at Princeton University.