Trump Doubles Down on Criticism of ‘Aggressive’ Rate Hikes By the Fed

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The Fed last raised interest rates in September and left intact its plans to steadily tighten monetary policy, as it forecast that the USA economy would enjoy at least three more years of economic growth.

"It's a correction that I think is caused by the Federal Reserve with interest rates", Trump said when asked by reporters in the Oval Office about the stock market swoon.

"I think the fundamentals are still very strong".

The Fed traditionally remains outside the purview of the President, though Trump has at moments blurred the lines by commenting on Fed policy. By convention presidents rarely comment on central bank policy because the Fed is meant to be independent of politics.

Fed Chairman Jerome Powell is aiming to extend the second-longest USA economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth. "But I think it's far too stringent far too fast".

"The Fed is going wild", Trump told Fox News on Wednesday night. "They're so tight. I think the Fed has gone insane", he said.

White House Press Secretary Sarah Sanders said in a statement following the close of markets that the USA economy is "incredibly strong" despite the sell-off, which analysts attributed in part to trade tensions with China.

The U.S. Federal Reserve is plum loco.

A spike in Treasury yields and solid USA economic data have sparked concerns that the Federal Reserve may pick up the pace of its interest rate hikes.

Dow Down Over 1,000 Points Over Two-Day Span
The benchmark USA stock index hadn't suffered a five-day losing streak since November 2016, just before the presidential election. The CAC 40 in France dropped 2.1 per cent, Germany's DAX lost 2.2 per cent and the FTSE 100 in London fell 1.3 per cent.

Financing expenses are one of a business's chief costs, higher interest rates squeeze profit margins and activities that might have been profitable at lower interest rates, including hiring, become marginable of unprofitable, and do not take place.

President Donald Trump blamed the Federal Reserve for Wednesday's 832-point stock dive. As the economy heats up, pushing prices higher the central bank raises rates to prevent inflation from gaining hold. It is also expected to raise rates again by the end of the year. Over the last 30 years or so, bond yields had to hit at least 5 percent to lure equity investors. As interest rates go up, bonds, not equities, are starting to look more attractive to investors.

"They're being too aggressive", Trump said. He was persuaded by Treasury Secretary Steven Mnuchin that Powell, who was already a Fed governor, would be a force for stability. "The real question is not whether the Fed should be raising the interest rates from where they are now, but how far and how fast should they raise interest rates".

The turmoil came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets. By law a president can only fire a Fed chair for cause, not a disagreement in policy.

Cost of servicing the deficit will move higher as rates continue to go higher as maturing debt is replaced at higher rates.

Mr Trump is correct in saying that rising interest rates tend to strengthen the USA dollar, as investors return funds to the United States in search of higher returns and safer investments.

Trump said he had no intention of firing Powell.

U.S. investors are suffering their biggest losses since February which have escalated tensions between Trump and Powell.

"It wouldn't take much for there to be a significant decline in consumer sentiment that seemingly comes out of nowhere", said Peter Atwater, president of Financial Insyghts.