Biz leaders fight Trump on Fed critique

Marco Green
October 12, 2018

During a rally in Pennsylvania on Wednesday night, Trump said he didn't believe the Fed was accurately adjusting its interest rate policy in line with USA economic data. He has imposed tariffs on an estimated half of all Chinese goods imported to the United States, worth some 250 million dollars.

But higher United States interest rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.

Rising bond yields have been drawing investors out of the stock market, and the best-performing stocks over the past year took some of the biggest losses on Wednesday.

The Fed has said strong economic performance in the USA means that the ultra-low rates put in place to spur economic activity after the 2008 financial crisis are no longer necessary.

"But I really disagree with what the Fed is doing", Trump added.

And while he acknowledged higher rates helped savers, he criticized the Federal Reserve's tactics as "too aggressive".

Trump on Thursday also indicated that the Fed's policies were harming him personally.

Trump's comments and the stock slide "won't be enough to prevent the "crazy" Fed from raising rates again in December", Capital Economics analysts wrote on Thursday after the last consumer price data, which, while slightly below expectations, were still roughly in line with the Fed's plans.

With global stocks declining for the second day amid concerns about rising interest rates, Trump blamed the Federal Reserve.

"It seems like the Fed is continuing on the course that markets expect, to raise interest rates given the tight labour market", said Phillip Swagel, who was a top Treasury official during the George W. Bush administration.

The Federal Reserve can likely stop raising USA interest rates once they reach about 3 per cent, as long as inflation remains around 2 per cent and the economy is doing well, Chicago Federal Reserve President Charles Evans suggested on Wednesday. "The Fed is going loco and there's no reason for them to do it and I'm not happy about it".

Mr Trump also renewed his criticism of the U.S. central bank. "It's probably healthy. This will pass and the United States economy remains strong". Unemployment fell last month to a 49-year low of 3.7 per cent. The Dow and the S&P 500, the benchmark for many index funds, both lost more than 3 per cent, and the NASDAQ fell more than 4 per cent. Trump owes more than $300 million to Deutsche Bank of debt with interest rates that rise or fall depending on Fed policy.

The Dow plunged almost 832 points on Wednesday, the third-worst point decline in history.

Other reports by Click Lancashire

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