Published: Sat, October 27, 2018
Markets | By Erika Turner

Five things to know about Trump's war (of words) on the Fed

Five things to know about Trump's war (of words) on the Fed

During an interview Tuesday with The Wall Street Journal, President Trump said that while the Federal Reserve has its independence when it comes to setting economic policy, he would like Chairman Jerome Powell to know that he wants interest rates lowered.

The US economy is in good shape to keep expanding, but more interest rate increases will be needed to maintain that trajectory without inflation, newly-installed Federal Reserve Vice Chairman Richard Clarida said on Thursday (Oct 25). "I'm very unhappy with the Fed because Obama had zero interest rates". To that he simply said "too early to tell, but maybe".

But the president has lately expressed frustration with the Fed's gradual interest rate increases, created to slow down the economy and prevent inflation from taking off - standard macroeconomic steps that Trump insists are undercutting his expansionary fiscal moves.

Trump said the Fed poses the biggest risk to the United States economy, adding that higher interest rates would slow growth and add to the national debt. Before becoming the president he had complained that the bank is moving very slowly in increasing the interest rates.

The comments were in response to questions from economist Adam Posen, a former policymaker at the Bank of England, who said Trump's criticisms are "pretty unprecedented for the last couple of decades from a USA president".

In the Wall Street Journal interview, Mr. Trump was asked why he thought Powell was raising rates.

FILE- In this September 26, 2018, file photo Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington.

Trump claims Fed chairman Powell “almost looks like he's happy” to be raising interest rates. “Every time we do something great he raises the interest rates.”
Trump says he 'maybe' regrets making Powell Fed chairman

This outlook is in line with comments by Powell and the policy setting committee.

"I think the fed is making a mistake, they're so tight", he stated.

"We're working hard to try to sustain the expansion and keep unemployment low and inflation right on target", Powell said at his last public appearance October 3. If doubts were to emerge in markets about the central bank's credibility, then investors could push up borrowing costs, ultimately slowing the economy and hurting stocks, thus meaning Trump's lobbying had backfired.

Powell was previously appointed to the Fed's Board of Governors by former President Barack Obama in December 2011.

Trump made his first public comments signaling dismay about his pick on July 19, when he told CNBC he was "not thrilled" about the Fed's rate increases.

The Fed has raised its benchmark policy rate three times this year, by a quarter-percentage point on each occasion, bringing to six the number of increases since Trump was inaugurated.

On Sept. 26, the Fed raised the target range for the federal funds rate to 2-2.25 percent. Trump blamed the nation's central bank for the latest market turmoil, saying the "Fed has gone insane".

Suspected Explosive Devices Mailed to Obama, Clintons, CNN
The Secret Service said media reports that it has intercepted a suspicious package bound for the White House are incorrect. However, the president has often targeted the intended recipients of the packages in rally speeches and on Twitter .

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