President Trump Raises Attacks On The Federal Reserve's Chairman

Randal Sanchez
October 28, 2018

Trump has called the Fed's policy of gradual interest rate increases "crazy" and the "biggest threat" ahead of midterm congressional elections on Nov 6.

"Every time we do something great, he raises the interest rates", Trump said, adding that Mr. Powell "almost looks like he's happy raising interest rates".

"President Donald Trump's recent public criticism of Fed Chair Jerome Powell is a clever attempt to pre-emptively blame the Fed and its interest rate hikes for any future downturn in the USA economy".

The president has made no secret of his objection to the Fed's tight policy stance but has grown increasingly outspoken as United States stock markets have fallen and midterm elections near.

Mr. Trump said that though it seemed too early to declare that nominating Powell to his current position was a mistake but there is always a "maybe".

The target range for the federal funds rate, now at 2 percent to 2.25 percent, is nevertheless still low by historical standards. Many Fed policymakers expect higher borrowing costs to begin to restrain growth after two or three more rate hikes. 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".

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With the last rate hike came an indication that the Fed's era of adopting and accommodative stance was over.

"If strong growth and robust employment gains were to continue into 2019 and be accompanied by a material rise in actual and expected inflation", he said, "that circumstance would indicate to me that additional policy normalization might well be required beyond what I now expect".

Earlier this month, as investors dumped stocks amid concerns over rising interest rates, Trump said the central bank was "going loco" and "out of control". It was the third increase this year and the eighth since December 2015, when the Fed started inching rates up from effectively zero percent. He also labelled the Fed's rate hiking policy the greatest threat to the economy, which has been boosted this year by one of the largest tax cuts in US history.

Fed officials raised their benchmark rate by 25 basis points in September. Furthermore, it may be just as likely that if the economy does slow, it will be because of the trade war rather than interest rates. "Trend growth in the economy may well be faster and the structural rate of unemployment lower than I would have thought several years ago".

Trump is also not happy with some of the members of the Fed he has already appointed. 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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