Wednesday, 12 December, 2018

Is The Fed Trying To Tank The Trump Economy Before The Midterms?

The Federal Reserve is not pleasing President Trump with its policy on interest rate increases The Federal Reserve is not pleasing President Trump with its policy on interest rate increasesGETTY IMAGES
Jean Garcia | 13 October, 2018, 01:12

Toronto's main index lost 336.65 points or 2.1 per cent, to 15,517.40.

As Hurricane Michael pummeled Florida, Wall Street was battered by storms as well, with the Dow shedding about 830 points, in the biggest fall since February, to close the day at 25,498.74.

The S&P 500 closed down 2.1 per cent after its sixth losing session in a row. The Dow Jones Industrial Average more than doubled under Presidents Reagan and Obama, more than tripled under President Clinton and fell 27% under President George W. Bush.

Yet there is little evidence that rates are too tight given current economic conditions, as shown by the following three charts.

Trump's latest attack on the USA central bank appeared to blame the Federal Reserve for a stock rout that market analysts mostly attributed to fresh concern about his trade war with China. "It's so tight. I think the Fed has gone insane", Trump told reporters shortly after markets closed, as he arrived in Erie, Pennsylvania for a rally.

I don't think the Fed is on the wrong path.

The President said this week he prefers lower interest rates but added he would not speak directly to his Fed chairman appointee Jerome Powell, preferring instead to remain hands-off.

Mr Trump also told Fox News the Chinese had lived too well for too long.

In July, the president complained about the Federal Reserve raising interest rates.

Here are some Google Assistant updates coming to Google hardware
You can now use Google Assistant to create multi-room audio using your smart speakers , which includes the Google Home Hub. You'll be able to do things like setting timers or reminders without using your PIN or fingerprint, as you now have to.

Wall Street stocks plummeted Wednesday amid worries about surging USA interest rates and the impact of trade disputes, as President Donald Trump blamed the Federal Reserve, saying it had "gone insane".

Trump had blamed "crazy" Fed policies for contributing to current financial market turmoil as a global sell-off continued amid stronger signs of rising financial volatility which the International Monetary Fund and the World Bank were scheduled to address during their annual meetings.

A Fed official said the central bank would not comment on the president's remarks.

"I do worry about bringing the Fed into what is really a pretty toxic political environment and undermining confidence in the Fed", Kohn said Thursday in a CNBC interview. 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.

Trump has repeatedly touted the spate of Wall Street records as proof of the success of his economic program, including his confrontational trade strategy, and criticized the Fed for raising the benchmark interest rate - three times this year - saying it would undermines his efforts.

Mr Trump is correct in saying that rising interest rates tend to strengthen the U.S. dollar, as investors return funds to the United States in search of higher returns and safer investments.

Meanwhile, trade conflicts raise costs for companies, which could hit the bottom line in quarterly earnings - something analysts said helped prompt Wednesday's sell-off. "The president is not dictating policy to the Fed.They are independent".

Powell has brushed off the comments, saying officials do not pay attention to politics. "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".

'And we just try to do the right thing for the medium and longer term for the country'.

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