Larry Kudlow: Federal Reserve Groupthink Is a Bureaucratic Disease

Thursday on Fox Business Network’s “Kudlow,” host Larry Kudlow discussed the Federal Reserve’s “groupthink” on tariffs and inflation.

Kudlow said, “Other war, as Breitbart’s John Carney put it. The Federal Reserve has gone to war against tariffs. Now, unlike the Middle East, this here is a phony war. The fed stubbornly refuses to lower its target rate because they decided that Mr. Trump’s tariffs will increase inflation. So I ask why exactly is your model of tariff inflation? Because so far, with a 10% baseline tariff in recent months, inflation rates have actually come down, not up. Since January, the CPI is is down to only 1.4% annually. That’s below the Fed’s 2% target. So tariff inflation has been missing in action. And Jay Powell does not refer to this. Now Powell himself is not an economist. He’s essentially a bureaucrat being driven by several hundred economists on the board staff. But again, we don’t know what their model is. All the Fed right now is guilty of groupthink. And President Trump has fingered that problem because he’s been saying the Federal Reserve Board is complicit with the mistakes of Jay Powell. Oh, groupthink is a bureaucratic disease. All these Fed announcements have 12 to nothing votes.”

He added, “So where are the Trump appointees? Where is Vicky Bowman? The new vice chair for supervision? Where is Chris Waller, the former Notre Dame economics professor? Where is some diversity of thought? And why aren’t these board members questioning Powell’s slippery and rather uninformed anecdotes of his new turf war on inflation? Fed policy is completely opaque and nontransparent. We have no idea how they arrive at their conclusions. So here’s a thought. During Mr. Trump’s first term, he put on a number of tariffs during the China trade talks, implemented a 25% tariff on China. He put 25% tariffs on steel and aluminum, 30% tariffs on solar panels and 20% on washing machines. And yes, the inflation rate during those years was basically 2% or even less. You can’t generate an economic model based simply on one variable.”