Donald Trump respects independence of the Fed, U.S. treasury secretary says

13 October, 2018, 23:34 | Author: Billie Castillo
  • President Trump spoke with reporters after arriving at Erie International Airport for a campaign rally at Erie Insurance Arena on Wednesday

For much of the last couple of years, short-term interest rates, which the Fed controls directly, have risen much faster than longer-term rates, which are set based on global supply and demand for bonds.

The Dow tumbled 546 points (2.1 per cent) on Thursday amid heavy selling. While the yield curve remains flat by historical standards (the gap between 10-year and two-year bonds was up to only 0.33 percent in recent days), it has moved in a direction consistent with a more optimistic outlook.

At the closing bell, the Dow Jones Industrial Average was at 25,049.65, down 2.1 percent or 545 points, bringing its losses for the week to more than five percent.

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

Japanese stocks plunged by more than three percent Thursday following the worst session on Wall Street for months, as US President Donald Trump said the Federal Reserve had "gone crazy" with plans for higher interest rates.

"I think the Fed is making a mistake".

Even chief Trump economic adviser Larry Kudlow, qualifying the president's opinion of Fed chair Jerome Powell's Fed, said he thought the central bank was "on target", and that its ability to raise rates was a sign of "economic health, that is something to be welcomed and not feared". There's a case to be made that the Fed should be even more restrained; economist Paul Krugman declared on Twitter, "The problem is that the 2% target is nearly surely too low: the Fed should actually let inflation rise above that level".

Later on Wednesday in an interview on Fox News, Trump dismissed the idea that trade tensions with China caused the dive.

He said the USA meant to include the language used in the recently concluded deal with Canada and Mexico, which prohibits the competitive devaluation of exchange rates, would be used in future trade agreements.

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But Trump now sees the Fed's gradual return of rates to normal levels as disrupting the stock market and an economic boom he argues would otherwise endure for many years.

"We know the Fed is independent".

The breach of norms is not surprising for a real-estate-developer and reality-star-turned-president who has cheered as Wall Street has soared to new heights this year, hitting repeated records, and used that as proof his economic policies were working.

Powell wants the Fed to be immune to political considerations. So the jobs data might have suggested to the market that the Fed would accelerate its rate-hiking cycle, beyond one more in December and three more next year, as it implied in its policy meeting on September 26.

Trump said the downslide of the stock was in fact a course correction.

Trump's remarks on Thursday were the latest in series of recent barrages he has unleashed at the Fed.

In a brief interaction with reporters and later in comments to Fox News, Trump said the USA central bank was "too aggressive" in raising interest rates.

Powell has brushed off the comments, saying officials do not pay attention to politics. The criticism is also unusual given that Jerome Powell, the Fed chairman, was appointed by Mr...

Managing Director of International Monetary Fund (IMF) Christine Lagarde talks during a press conference ahead of the annual meetings of the IMF and World Bank in Bali, Indonesia on October 11, 2018.

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