Wednesday, 13 November, 2019


Trump escalates his war with the Fed

Bennie Garza | 21 July, 2018, 18:32

Both political and economic officials believe that the central bank needs to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy. But in the CNBC interview, the president said he was seeking to do only what's fair.

Trump said that raising American interest rates makes investment in China comparatively attractive, because China manipulates its currency by artificially devaluing it.

The People's Bank of China set the Chinese currency's central parity rate to 0.9 percent weaker against the dollar on Friday.

An employee of a bank counts USA dollar notes at a branch in Hanoi, Vietnam May 16, 2016. "I want them to do well", he said of China. "As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions", it reads. But JPMorgan economist Michael Feroli advanced an interesting alternate theory: Trump's comments may inspire the Fed to go the other direction. "Debt coming due & we are raising rates - Really?"

But, with unemployment at historic lows and inflation on the rise, Powell has said the U.S. economy is strong enough to weather the interest rate increases. Eventually Burns relented, aiding Nixon but also helping to feed runaway inflation that dogged the USA economy for almost a decade. In his exact words, the President said he's "not thrilled" with rate hikes and worries that work done by his administration will be nullified.

The Fed hiked interest rates twice this year, and plans to raise them two more times by the end of 2018.

"If the market starts to feel the Fed is being manipulated politically, that's a really bad story".

"The Fed should be independent but that independence does not mean that is an institution outside of the government of the United States", said Mark Grant, managing director at money managing firm B. Riley FBR Inc.

The president's latest financial-focused comments come ahead of the European Commission president Jean-Claude Juncker's visit to Washington next week for talks aimed at heading off a US-European trade war.

The current Fed chairman, Jerome Powell, is a Trump appointee.

"The United States should not be penalized because we are doing so well", Trump said in a tweet Friday morning.

"In China their currency is dropping like a rock and our currency is going up, and I have to tell you it puts us at a disadvantage".

"Uncertainty over the White House's dollar policy will certainly sow renewed seeds of doubt into global investors", Viraj Patel, foreign exchange strategist at ING, wrote in a report.

Trump had a love-hate relationship with former Fed chief Janet Yellen.

Trump also expressed concerns about how higher interest rates would impact record levels of US federal debt, which has now exceeded $20 trillion.

The Fed has raised rates five times since Trump took office in January 2017 and has provisionally pencilled in two more increases for this year.

Past efforts to apply political pressure on the Fed have sometimes hurt the economy.

"Because we go up and every time you go up they want to raise rates again".

"I am not happy about it".

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