Former Federal Reserve Chairman Alan Greenspan is urging current central-bank officials to just ignore any criticism coming from the Oval Office.
Greenspan explained to CNBC that the four presidents he served under commented on central bank policy "all the time."
Greenspan served as chairman from 1987-2006 under Presidents Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush.
"The best thing that you can do if you're in the Fed is put earmuffs on and just don't listen," Greenspan told CNBC.
The U.S. central bank has settled into a gradual policy of raising its policy interest rate that began slowly in late 2015, and is expected to raise rates again in December and next year.
President Donald Trump has repeatedly criticized the Fed, saying the central bank was restraining credit so swiftly that it threatened the country's economic health. The president has called the Fed "crazy," "loco," "ridiculous," and "too cute."
Past U.S. presidents have been reticent to criticize because Fed independence is seen as important for economic stability.
But Trump on Tuesday said he was "not happy with what" Powell is doing. "Let me use a nice term: he's being extremely conservative," he said on the Fox Business Network.
"My biggest threat is the Fed because the Fed is raising rates too fast," Trump said. "I put a couple of other people there I'm not so happy with too, but for the most part I'm very happy with people."
Trump added he is not trying to oust or blame Powell, whom he appointed to replace former Chair Janet Yellen. The president also appointed two of the three other policymakers on the Fed's powerful Board of Governors, Randal Quarles and Richard Clarida.
The Fed independently makes policy decisions but regularly reports to Congress. Recent data has been in line with its portrait of a strong economy that has a "remarkably positive" outlook, Powell said on Oct. 2.
Meanwhile, Greenspan urged current officials not to worry so much.
"I was at the Fed for 18½ years. I got innumerable notes, pledges, requests, et cetera to lower rates. I do not recall a single instance where somebody in the political realm said we need to raise rates, they're too low," said Greenspan.
"You'll find every president has an insight into how the markets work and where interest ought to be, which is always superior to that of the Federal Open Market Committee," Greenspan said in an interview on "Squawk Box."
Greenspan also gave a public vote of confidence to the current central-bank chief.
"Jay Powell is a first rate Federal Reserve chairman," he said. "This guy knows what he's doing. I've known him for years. He's extremely competent. His competence is such that I don't worry about where the Fed's going."
To be sure, White House economic advisor Larry Kudlow said on Wednesday that Trump was not demanding a policy change at the Fed after Trump heaped more criticism on the Fed on Tuesday, calling rising U.S. interest rates his "biggest threat."
In what has emerged as a pattern recently, the administration official sought the day after Trump's comments to tamp down the unusual presidential criticism of the U.S. central bank, saying that Trump actually largely agreed with the Fed.
"He is not interfering with their independence," Kudlow said Wednesday morning on the Fox Business Network, the same television channel used by Trump.
"He is not going over there to tell them to change their plans or their strategy."
While the Fed is politically independent and its policymakers have almost uniformly signaled they intend to keep tightening monetary policy in the face of record low unemployment and signs of inflation, some economists have warned that Trump's hectoring could eventually harm its legitimacy."
A protracted battle over Fed independence would risk higher long-term interest rates through higher term premiums and higher inflation expectations, contrary to Trump's own objectives," Michael Hanson, head of global macro strategy at TD Securities, said in a note.
Fed officials have generally not directly responded to Trump, though Chicago Fed President told a Flint, Michigan audience last week it was "unusual" for a president but "fair" to question how much to raise rates.
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