Trump's attacks on the Fed could backfire, says former official

Trump's attacks on the Fed could backfire, says former official

During a Fox Business Network interview, Trump said the biggest problem facing the USA economy and stock market was the Fed's path of interest-rate hikes under Chairman Jerome Powell.

The Fed has been raising interest rates since 2015 and after the rate hike last month it stopped describing the stance of monetary policy as "accommodative", meaning that it no longer thought the level of interest rates was stimulating the economy.

"The fed raising interest rates too quickly, she's too independent", - he said and noted that he does not like what makes the Chairman of the regulator Powell, but to intervene in the policy of the fed, the President can not.

Late last week, Treasury Secretary Steven Mnuchin said that despite Trump's attacks on the Fed, the president respects the central bank's independence.

The Federal Reserve has raised interest rates three times this year and indicated more hikes are coming.

Every Fed policymaker backed the central bank's September decision to raise the target policy rate to between 2 percent and 2.25 percent, according to minutes of the Sept. 25-26 meeting, published Wednesday.

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"The fact that they refrained from labeling China a currency manipulator is a positive development, especially from the point of view of emerging market currencies", said Attrill.

Trump has said he is not trying to oust Powell, whom he appointed to replace former Chair Janet Yellen. "I put a couple of other people there I'm not so happy with too but for the most part I'm very happy with people".

Still, the minutes showed that, for the moment at least, American policymakers were largely in agreement about the near future - despite the increasing heat from the president, who fears higher rates will derail his economic agenda. "Obviously, presidents can speak out if they choose to and give their opinions about policy, there's no law against that, but I don't think it's wise and I do think the Fed has a strong reputation for acting in an independent and non-political way and I would not like to see that reputation damaged".

The market has priced in another hike in December, with three more increases expected in 2019, which would take rates in the U.S. to a level slightly above neutral. I'm not blaming anybody, I put him there.

"I think there is some potential for labor force participation to move up, perhaps as workers respond to the incentives of plentiful job opportunities and higher wages", said Quarles, "thereby adding to the productive capacity of the economy and pushing back the constraints on growth".

However, the same Fed minutes also noted global growth concerns and worries the United States dollar could sink lower, explaining the somewhat hawkish view on U.S. markets overnight.

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