President Donald Trump's prospective Federal Reserve nominee sees an economy that is booming and thinks the central bank should not be a force standing in its way.
Judy Shelton told CNBC that Friday's strong jobs report is a good example of fiscal policy working, though she has expressed reservations about the Fed's actions.
The June nonfarm payrolls increase of 224,000 was "fantastic," Shelton told CNBC's Rick Santelli. "I think it shows that the pro-growth economic agenda under the administration is working. I think it shows that economies really do respond to positive policies that help create a better environment for businesses to be successful so they can hire people."
In remarks after the report came out, Trump again blasted the Fed, saying "we don't have a Fed that knows what they're doing." Trump repeated his claim that the economy would accelerate like "a rocket ship" with lower rates, and has said in the past that the Dow Jones Industrial Average would be 10,000 points higher with less restrictive monetary policy.
Shelton said keeping the stock market strong is important for Americans and said the Fed shouldn't put the U.S. at a competitive disadvantage with the rest of the world, where zero-interest policy rates are common.
"When you consider that more than half of American households are invested through mutual funds and pension funds in the market, I don't want the Fed to pull the carpet out from under them by taking a position that is not conducive to further providing the liquidity for this growing economy," she said.
The Fed has hiked its benchmark overnight lending rate nine times since December 2015, and reduced the bonds it is holding on its balance sheet by about $600 billion in a program that began nearly two years ago. Though officials had indicated the likelihood of two more rate hikes this year, they have since backed off and now say the increases are over for the time being and the balance sheet reduction will end in September.
But markets are looking for more. There currently is a rate cut fully priced in for the July Fed meeting, and traders see two more cuts likely before the end of the year.
Shelton did not offer a specific view on where she thinks rates should be. She said central banks are creating an environment where good news, like Friday's jobs report, is being treated like bad news in the market, and said she doesn't "want to punish the U.S. economy, which is flourishing, by doing the right thing."
"It would be nice if we didn't have a perverse reaction to good news, but it seems like we do," she said. "The problem is, you reap what you sow. Central bank easing has created this environment. I think markets are wrong in questioning it."