China’s decision to let the yuan weaken past the benchmark of 7 per U.S. dollar is roiling world markets, leading to a steep selloff. The Dow industrials and S&P 500 indexes were both down more than 2% by midday Monday. President Trump accused Beijing of “currency manipulation,” tweeting that the move is a “major violation which will greatly weaken China over time!”

He also seemed to put the Fed on notice, tweeting “Are you listening Federal Reserve?”

But what role does the Fed actually play in controlling currency exchange rates?

“Not much,” said Gary Richardson, a finance professor at the University of California at Irvine and the former official Federal Reserve historian. Congress has told the Fed that currency exchange rates are “not part of your job.”

By cutting interest rates last week, the Fed inadvertently pushed up the value of the dollar. Chairman Jerome Powell’s news conference sparked confusion over the pace of future rate cuts, driving down stocks and pushing the dollar to a two-year high. A strong dollar makes it more expensive for U.S. firms to do business overseas, the opposite of what Trump wants.

Powell has made clear the central bank doesn’t consider the dollar in making policy decisions.

“The Treasury Department, the administration, is responsible for exchange rate policy, full stop,” Powell told an audience at the Council on Foreign Relations on June 25. “We don’t comment on the level of the dollar. We certainly don’t target the level of the dollar. We target domestic economic and financial conditions as other central banks do.”

Richardson says, for decades now, the Fed has been told that exchange rates don’t matter, and that it shouldn’t focus on them in setting policies.

“Before the 1970s, we had a fixed exchange rate and the Fed’s primary policy purpose was to maintain that fixed exchange rate,” Richardson told Yahoo Finance’s The First Trade. “Since the 1970s, Congress has told the Fed that they should ignore the fluctuations in currency markets.”

Even if the president goes after Powell and the other Fed leaders over the yuan, Richardson says the only ones who can change the policy is Congress.

“Congress created the Fed and the Fed reports to Congress, not to the president,” he said. “By law, the Fed should ignore what the president requests and just respond to the dictates by Congress.”

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