Trump 'disappointed' in Fed chair Jerome Powell as global stocks tumble

Andrew Cummings
October 12, 2018

Fed Chair Jerome Powell, whom Trump named to lead the central bank, has repeatedly brushed off the comments saying officials do not pay attention to politics. The Federal Reserve is determined to continue until at least the end of next year. Three have PhDs in economics and three have law degrees.

Voting for four hikes in the a year ago, the Fed has been trying to prevent the economy from overheating-raising interest rates essentially discourages borrowing.

"We know the Fed is independent", Kudlow said.

She recommended more flexibility on capital flow management, adding that some emerging markets, including South East Asian countries, had been far too reluctant to ramp up capital controls to protect their own economies. That comes after a big tax cut enacted last December.

The central bank's preferred measure of inflation is roughly at policy makers' 2 percent objective, and Powell said last week that "the outlook of forecasters inside and outside the Fed is for more of the same". The governors want the Fed Funds rate higher so there will be room to lower rate when the next recession strikes.

Trader Peter Tuchman works on the floor of the New York Stock Exchange Wednesday Oct. 10 2018. The Dow Jones Industrial Average plunged more than 800 points its worst drop in eight months led by sharp declines in technology stocks. (AP

Higher interest rates tend to moderate economic growth and makes borrowing more expensive for the US government as well as businesses and consumers.

Investors are leaning into safer stocks with steady dividends - utilities and consumer staples - and pulling out of the higher-paying, higher-risk stocks as other guideposts of growth, like the communication sector, tumbled.

And the housing sector is especially sensitive to the longer-term interest rates set on the bond market, which in turn determine mortgage rates. At just over 2 percent, the Fed's short-term policy rate remains low by historic standards, and most indexes of borrowing costs and credit flows still regard broader financial conditions as "loose" and conducive to economic growth. "It is doing well", Trump said.

Legal oversight of the Fed lies with Congress, where Powell has been busy bolstering relations on both sides of the political aisle. "We don't let other things distract us".

Former Treasury Secretary Larry Summers said the economy was on a "sugar high" that had been fueling stock prices.

With inflation barely above two per cent and unemployment at the lowest in a generation, the Fed is expected to tighten once more this year, and three or four times in 2019.

"I don't think it's that at all", he said.

The Federal Reserve issued no new comment in response to the president's remarks.

For example, experts say that the roots of the 2008 financial crisis date back to 2000, when the federal agency began slashing interest rates.

He said the Federal Reserve was being "too aggressive" by raising interest rates this year and getting "a little bit too cute". "That doesn't seem especially surprising".

It was the latest in series of recent barrages the president has unleashed at the Fed, which under his hand-picked chairman, Jerome Powell, has been gradually raising rates as the economy has strengthened to prevent a run-up in inflation. U.S. President Donald Trump commented the Fed has "gone crazy" and "is making a huge mistake", on Wednesday.

Trump's comments echo his previous criticisms of recent months, which broke more than two decades of White House tradition of avoiding comments on monetary policy out of respect for the independence of the USA central bank.

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

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