At IMF-World Bank meetings, Powell praised as Trump calls Fed 'crazy'
- Author: David Armstrong Oct 14, 2018,
Oct 14, 2018, 21:18
Trump said all of this after the longest streak of stock-market declines since the days before the November 2016 election.
"I think the Fed is making a mistake". During a telephone conversation with Fox News later, the President said the Fed was "going loco" and that he was not happy about it. "Interest rates are still accommodative but we are gradually moving to a place where they will be neutral", he said, adding that the U.S. economy was a "long way from neutral (interest rates) at this point, probably".
"Our objective would be that the [language on} currency issues we would like to include in future trade agreements", he said. I don't know what their problem is.
While he acknowledged that higher rates helped savers, he criticized the Federal Reserve's tactics.
"This is just who we are and I think who we will always be, which is, we're a group who - we're quite removed from the political process", Powell said in a recent interview.
After US stocks suffered their worst sell-off in eight months on Wednesday, President Donald Trump blasted the Fed as "crazy" for continuing to raise interest rates this year. With unemployment is at less than four percent and the economic expansion one of the longest in history, Powell is opting for cautious rises in the interest rate.
After the financial meltdown of 2008, the policy of the Federal Reserve was to keep interest rates low to spur economic activity and revive the general economy.
According to reporting by CNBC interest rates have been on the rise over the past several weeks, with the benchmark 10-year Treasury note - a barometer for corporate debt and mortgages rates - climbing to its highest level in more than seven years.
Trump has slapped tariffs on $250 billion in Chinese goods this year, and Beijing has retaliated with levies of $110 billion of American products.
The tariffs Trump imposed on China and other trading partners on key goods like steel and aluminum, and Beijing's retaliation against United States products, have raised prices for American companies, which is expected to start to hurt corporate profits and could dampen investment as well. "They're so tight. I think the Fed has gone insane", added Trump, who tapped Powell to lead the bank but has publicly criticized the Fed under his tenure. Presidents for more than two decades had avoided public comments on the Fed's interest-rate policies as a way of demonstrating respect for the institution's independence. The president is not dictating policy to the Fed. "I don't want to slow it down even a little bit, especially when you don't have the problem of inflation and you don't see that inflation coming back".
Those financial crisis-inspired programmes - such as quantitative easing - are now ending and the Fed has raised USA interest rates three times already this year - raising borrowing costs - and could add a fourth hike by the end of 2018.
Right now, the Fed is raising rates as there are factors at play that could hurt the US economy.
Trump, who departed for Erie just before markets closed on Wednesday, was briefed by officials about the sell-off. The Fed under his hand-picked chairman Powell has been gradually raising rates as the economy has strengthened to prevent a run-up in inflation.
Mnuchin says that the fundamentals of the US economy remain very strong and he views the sharp drop in stock prices as a natural correction with markets often going too far in both directions. "President Trump's economic policies are the reasons for these historic successes and they have created a solid base for continued growth".