Fed recognizes Trump's infrastructure plan as the 'real pillar' of the US economy, economist says

Reporting by Willem Marx, Writing by Sam Meredith
President Donald Trump
Carlos Barria | Reuters

The Federal Reserve recognizes the substantial infrastructure spending plans pledged by U.S. President Donald Trump as the real pillar to the economy, Nomura's chief economist told CNBC on Thursday.

"When Trump came up with this infrastructure spending (plan), you notice that both Janet Yellen and Stanley Fischer came out and welcomed that as the real pillar supporting the U.S. economy," Richard Koo said as he joined CNBC from Lake Como, Italy, at the Ambrosetti Forum.

Fischer, vice chairman of the Federal Reserve proclaimed shortly after Trump's surprise election victory in November that boosting spending on infrastructure could shoulder some of the burden away from the U.S. central bank to support the economy.

Meanwhile, Fed Chair Janet Yellen said in February she would be watching carefully to see how Trump's campaign pledges impacted American workers.

A 'big if' for the US economy

The U.S. president is seeking approval from Congress for a $1 trillion infrastructure bill in an attempt to reinvigorate the U.S. economy.

However, Trump's surprise failure to bring about swift health-care reforms left many observers in doubt as to whether he can deliver on his other campaign pledges, such as his plans to upgrade America's roads, airports and rail lines.

"In that sense what Trump is trying to do, by government borrowing and spending the money is a positive thing for the U.S. economy … But whether he will get that or not in the Republican-controlled Congress is, of course, a big if," Koo concluded.