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Larry Kudlow says Fed's models are 'highly flawed,' but central bank is moving in right direction

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Key Points
  • "They do the best they can. Their models are highly flawed," Kudlow says of the Fed. "The 'deep state' board staff, of course, has not been helpful — oops, did I say that?"
  • President Trump and Kudlow have attacked the Fed and its leadership for what they considered restrictive monetary policy.
  • The Fed has reversed its 2018 cycle of interest rate hikes and instead has cut the overnight lending rate twice in 2019, a boon to the economy, Kudlow says.
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Larry Kudlow: The Fed is moving in the right direction despite 'highly flawed' models

Larry Kudlow, President Donald Trump's top economic advisor, said Thursday the Federal Reserve's economic models are "highly flawed," but the central bank is finally moving in the right direction.

"I don't want to get into a lot of Fed bashing. They do the best they can. Their models are highly flawed," Kudlow told CNBC from the White House lawn. "The 'deep state' board staff, of course, has not been helpful — oops, did I say that?"

"But the fact is, the Fed is moving us in the right direction," he added.

rump and Kudlow have long attacked the Fed and its leadership for what they considered restrictive monetary policy. The White House has argued over much of 2019 that steep interest rates have capped economic growth and undermined the administration's trade dealings with China and others.

Trump had often attacked Fed Chairman Jerome Powell, saying last year that he's "not even a little bit happy with" his nominee and thinks the central bank is "way off base."

As recently as December, Trump discussed firing Powell because of widespread losses in the stock market in the last three months of 2018. Since then, the Fed has reversed its cycle of interest rate hikes and instead has cut the overnight lending rate twice in 2019.

That looser policy, Kudlow said, has finally started to help move the economy in the right direction.

"I will defend what's going on in the domestic economy because despite a very severe Fed tightening last year — maybe we're coming out of that now — nonetheless lower taxes and deregulation and opening up energy: We're still plugging along," Kudlow said of the broader U.S. economy.