There’s even concern over policies which Fed officials generally agree are positive. Deregulation gets high marks from the Fed, but the May minutes show that several members “expressed concerns that a possible easing of regulatory standards could increase risks to financial stability.”
And tax cuts and tax reform may be highly regarded, but Fed officials also want to know how they are paid for.
“If it’s a tax cut financed by increase in the deficit, my concern is that may give a short-term bump to GDP growth but not a sustainable bump,” Kaplan said. “We’ll have higher debt-to-GDP and I think that would be negative to economic growth.”
Fed Governor Lael Brainard is skeptical that so-called supply side tax cuts will do much to boost supply and instead increase “demand at a time when the economy could be at full employment.”
The unstated implication is that tax cuts could drive inflation higher and force the Fed to respond with additional rate hikes. There is also widespread skepticism that President Trump’s goal of hitting 3 percent is possible.
Fed Chair Janet Yellen has remained on the sidelines of much of the debate, though she did warn in a February testimony about the possible deficit implications of tax cuts. She has consistently urged Congress and the Administration to pursue “policies that would boost productivity growth and raise the economy’s so-called speed limit or potential to grow” but not been very specific about what would do that. She has mentioned education and infrastructure spending as two policies that could help.
The trouble is that, while much Fed support and criticism of the president’s economic policies come from generally held beliefs in economics, there isn’t a single set of policy tools that all agree would boost productivity.
—With additional reporting by CNBC’s Elizabeth Schulze
WATCH: Economists increasingly skeptical Trump’s plans will generate 3 percent growth.