Former World Bank President David Malpass criticized the Federal Reserve during a Wednesday appearance on Newsmax’s “Rob Schmitt Tonight,” accusing the central bank of missteps in interest rate policy and lending practices.
“The problem is the Fed’s been wrong. They’ve been late on interest rates, and they’ve also made lots of mistakes as far as lending within the economy,” he said.
Malpass contended that the Fed’s decisions have been consistently out of step with economic growth and the needs of average Americans.
“If you think of the forgotten man and growth for the U.S. economy, the Fed is leaning against it all the time,” he said.
“They have this kind of view — it’s really an economist’s nerdy view — that if you grow too fast, you better raise interest rates to cut it off. And so that’s where we are right now. The rates are too high.”
Malpass said U.S. interest rates remain significantly higher than those in Europe and Japan and questioned the rationale.
“The U.S. is the hot economy and should be attracting people into our debt much more easily. The rates are just too high,” he said.
When asked whether Fed Chair Jerome Powell’s cautious stance was a response to inflation fears stemming from the COVID-19 pandemic, Malpass pushed back.
“That sounds like an excuse, but the conditions now are really different,” he said. “[Former President Joe] Biden was choking the economy with regulation and then spending government money. It was pumping money into the economy, into the inflation rate.
“There’s no similarity to what we’re doing right now. We’re in a deregulatory mode with more energy coming onstream. So producers are ready to do more, but the rates are too high.”
Malpass also addressed recent inflation data, which showed a slight uptick in June.
“That number is the year-over-year number. So it’s picking up stuff that happened a long time ago,” he said.
“If you look just at what’s happening now this year, the month-over-month numbers are not bad. And they’re low and going down.”
He added that the underlying strength of the U.S. economy supports a case for lower interest rates.
“There’s competition, and that’s showing up. People were talking earlier in the year about, ‘Oh, [President Donald] Trump is going to cause a recession.’ That didn’t happen at all,” Malpass said.
“What we have going is a really hot economy that can draw in money, and I think justify lower interest rates.”
In response to critiques that tariffs are fueling inflation, Malpass disagreed with recent Wall Street Journal reports that tariffs are increasing prices.
“You haven’t seen it in the numbers,” he said. “The reality of the U.S. economy is it’s this hugely productive system … and I think it would do a lot more if we had lower interest rates.”
Pressed on how much rates should fall, Malpass said, “I really think when, as you cut, then you see that people want to put more money in. It’s just like a company that’s doing really well … We’d get the same effect.”
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