Friday, 24 May, 2019


Trump says 'maybe' he regrets picking Fed's Powell

President Donald Trump looks on as Mr Jerome Powell then his nominee to become Fed chief spoke at the White House on Nov 2 2017 Trump says 'maybe' he regrets picking Fed's Powell
Conrad Doyle | 27 October, 2018, 16:02

If Trump were able to successfully pressure the Fed into adjusting course, it could have sudden and unpredictable effects on the US economy. Trump had also attacked the bank last week when the share prices of U.S. plunged suddenly. The interest rate was lowered by the bank to cope up with the recession of 2008.

"Every time we do something great, he raises the interest rates", Mr. Trump said, adding that Mr. Powell "almost looks like he's happy raising interest rates". The Fed also expects the unemployment rate next year to dip to 3.5 percent - that would be the lowest jobless rate since 1969.

Trump says the Fed is raising rates too fast, blunting the economic stimulus from tax cuts and deregulation, and making life harder for his administration as the tariffs resulting from the USA trade war with China and other countries begin to bite. Officials are signaling that they will likely act again in December and continue to increase in 2019. In an interview with Fox Business News last week, the president said, "I put him there and maybe it's right, maybe it's wrong but I put him there". But whether the stock market weakness is a result of interest rates, the trade war or something else is nearly impossible to determine. He feels that this fluctuation in the interest rates will have a negative impact on the economy. Clarida, in his first meeting as vice chair in September, voted in favor of a quarter point rate increase, and now says more are warranted. Many believe the Fed policy is based on outdated theories.

"Changes in financial conditions are something that is relevant for the economic outlook", and need to be accounted for "if they are sustained", he said. His criticism could mount if the recent sell-off in stocks continues. He feels there is insufficient evidence that inflation will return, and rate hikes are unnecessary at this stage. There are no alarms going off now from labor market, Clarida said.

While growth is strong and may well have shifted into a higher permanent gear, particularly after data showing higher than previously estimated household savings available to support future spending, Clarida said it also may be the case that productivity is rising and that unemployment can fall lower than expected without producing inflation.

He warned, however, that monetary policy operates with a lag, and with inflation presently near the 2 percent goal, it would be important to monitor inflation projections closely, he said. He made similar remarks to reporters on the White House lawn earlier in October and in an interview with Reuters back in August. He joined Trump's other two picks, Powell and Randal Quarles, who now sit on the board with Lael Brainard, an appointee of former President Barack Obama.

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