Donald Trump's prediction in September that the Federal Reserve would raise interest rates once Obama was out of office has come true, though it's not clear what he thinks about it.
The Fed raised interest rates by 25 basis points on Wednesday at the conclusion of its two-day meeting, taking them to a range of 0.75% to 1% and signaling confidence in the strengthening United States economy. It also boosted rates by a quarter-point in December. Today's maneuver and the anticipation of future rate hikes could play out in a number of ways in the Trump administration, which has promised booming economic growth and tied its performance to the rallying stock market.
"A lot of it depends on how the stock market responds," said Jack Ablin, chief investment officer at BMO Private Bank. "I think that a quarter-point hike to 1% probably won't raise an eyebrow, but if the Fed does get more ambitious, especially if the stock market hiccups over it, it could get a tweet or something out of him."
Trump was critical of the Federal Reserve while campaigning. He accused Chairman Janet Yellen of holding interest rates artificially low to aid Democrats and at a September debate forecast a rate hike once President Obama left office. "The day Obama goes off, and he leaves, and goes out to the golf course for the rest of his life to play golf, when they raise interest rates, you're going to see some very bad things happen, because the Fed is not doing their job," he said.
Markets reacted positively to Wednesday's widely-anticipated rate hike, which will likely make Trump happy, given his recent penchant for touting the stock market as a measure of his success. But if subsequent hikes cause markets to waver, or if they put a damper on the economy, the tables could turn.
Trump has laid out aggressive goals for growth that many economists say are difficult, if not impossible, to achieve. He campaigned on a promise of 4% economic growth and the creation of 25 million jobs.
His pledge to accelerate growth and the Fed's maneuver to restrain acceleration could put the president and Yellen on a collision course, the New York Times' Binyamin Appelbaum recently pointed out. While the Fed is not trying to preempt the new administration's policies, it could slow down what the administration hopes could be their economy-boosting effect.
"The Fed is always between a rock and a hard place," said James Angel, associate professor at Georgetown's McDonough School of Business, quoting the late William McChesney Martin Jr., who served as Fed chairman for nearly 20 years, who said the Fed's job is "to take away the punch bowl just as the party gets going."
During the campaign, Trump advocated for higher rates, but as president, he would probably prefer a looser Fed policy that favors his stated targets and goals, said Gregory Daco, head of U.S. Macroeconomics at Oxford Economics. But what Trump wants doesn't necessarily matter.
"We're seeing flip-flopping in terms of guidance for the Fed, but in all honesty, I don't think the Fed cares too much about what the president would like," he said.
The Federal Reserve designed to be an independent body free from political influence. It is charged with three objectives: maximizing employment, stabilizing prices and moderating long-term interest rates. The U.S. unemployment rate fell to 4.7% in February, and inflation is approaching the Fed's 2% target.
"That is the Fed's objective. It shouldn't and will not in all likelihood respond to governmental pressures to achieve certain growth targets," said Daco.
Yellen, 70, has said she plans to serve out her four-year term as Federal Reserve chairman, scheduled to expire in February 2018. Trump cannot really fire her, and he has not given any indication of whether he might seek to reappoint her once her tenure is up.
To be sure, opinions vary on how much influence the Federal Reserve and the executive branch wield over one another and the broader economy.
"The Fed is irrelevant to how things turn out for him," said Moody's Analytics chief economist Mark Zandi. "'It's not like the Fed is going to be able to magically help the economy out, it's just a player."
And while Trump has taken to touting the stock market's strength, job growth and economic activity as evidence of his success, most of what's happening started before he reached the Oval Office.
"All of these elements are elements that predate Trump, and the Fed is going to react accordingly. It may prevent Trump from reaching is stated goals," said Daco, referencing his 4% growth pledge. "In a sense, that's not something that was realistic from the start."
But regardless of the Fed's hand of shaping the economy, Trump could be headed for a collision with it if he perceives it to be undercutting his goals.
"If things are going well, unemployment is low, the market is up, I don't think he's going to say anything. If the economy is not performing well, if the stock market's down, not up, if unemployment is rising, then I do think he's much more likely to be critical of everyone, including the Fed," said Zandi.
"The Fed makes a good whipping boy," said Angel.