Greenspan backs Fed's independence

The chair of the US central bank Janet Yellen should "disregard" criticism aimed at her by President-elect Trump, according to one of her predecessors.

Mr Trump has accused Ms Yellen of keeping interest rates low to help the Democrats, leading to speculation that she might now resign.

However, Alan Greenspan told the BBC's Newsnight that the Federal Reserve should not react to politics.

Ms Yellen could only be removed from office if she was impeached, he said.

Mr Greenspan, who served as Fed chairman between 1987 and 2006, said his initial reaction to Mr Trump's victory had been "shock".

"I didn't vote for anybody for president. I'm a lifelong conservative Republican and it's the first time I didn't vote. I couldn't vote for Hillary Clinton and Donald Trump was not my candidate," he added.

Independent operator

During the course of his election campaign Mr Trump questioned the independence of the US central bank with his claims that Ms Yellen was keeping interest rates low at the behest of President Barack Obama and to help Mrs Clinton.

He said he would "most likely" replace Ms Yellen after her term as Federal Reserve chair ended in January 2018, comments which have led to the speculation that she might resign earlier than that.

On Newsnight Mr Greenspan was asked what he thought would happen to the relationship between the presidency and the Federal Reserve now.

'The Federal Reserve is an independent operator and should not be involved in politics nor react to politics," he said.

"So the fact that Trump dislikes Janet Yellen, thinks she's doing things incorrectly, I think it's up to Janet Yellen just to disregard it. The only way she can be taken out of office is by a very complex impeachment," he added.

'Anger justified'

Mr Trump's victory, like the Brexit vote in the UK, is being seen as a vote for change by people who feel that the economic system has failed them.

It was put to Mr Greenspan, a keen advocate of globalisation, that blue collar workers in particular had lost jobs and seen a cut in their wages and they were angry.

"I think they're justified," he said.

"The system has ground to a halt. In fact it's ground to a halt among all the OECD nations, or the large majority of them. The European Central Bank is not functioning, Britain is going through very peculiar stages of uncertainty, we obviously are in the same category and Brazil has been in very bad shape and a goodly part of Latin America is following suit so that the world is not doing well."

However, he said he did not think globalisation had gone too far.

"I think that globalisation is a very major source of forward motion."