Wednesday, 17 October, 2018

Trump's stunning comments about the Federal Reserve could actually backfire

Lindsey Cook | 21 July, 2018, 11:12

President Trump's criticism of the Federal Reserve on Thursday came as a shock to traders, driving down U.S. interest rates, the U.S. Dollar and stocks.

Artjom Hatsaturjants, research analyst at Accendo Markets, said "market sentiment soured on President Trump criticising the Fed for hiking rates and threatening to go "whole hog" on imposing tariffs on all $500 billion of Chinese imports to the U.S., further inflaming global trade tensions and putting at risk central bank independence".

President Donald Trump said he's ready to hit all goods imported from China with tariffs, sending US markets sliding before the opening bell.

The president told CNBC that he is ready to place a tariff on every single Chinese good entering the U.S.in the latest salvo in what could quickly turn into an unprecedented trade war.

Breaking with tradition to avoid criticizing the Fed, Trump told CNBC he's anxious that the central bank's policies will cancel out his efforts to speed up the economy.

Trump criticized the USA central bank in comments aired Thursday, saying its course of interest rate increases counteracted his efforts at growing the economy.

Its release follows the imposition on July 6 of tariffs on $34 billion of Chinese imports by the United States.

Trump also accused the European Union, China, and "others" of manipulating their currencies lower and creating an uneven playing field with the US. I don't necessarily agree with it because he's raising interest rates, I'm not saying I agree with it, and I don't necessarily agree with it, I must tell you I don't.

"Given what we know about Powell, we see little chance the President has gotten in his head", Feroli wrote in a note to clients.

But one JPMorgan economists thinks Trump's public desire for lower interest rates could actually backfire. I want them to do well.

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During an interview with CNBC recorded Thursday, Trump said Fed Chair Jerome H. Powell's plan to continue gradually raising short-term rates was undermining the administration's efforts to spur economic growth.

The Fed has raised rates five times since Trump took office in January 2017, and has penciled in two more hikes for this year.

He wants the growth to continue and anxious that interest rate hikes will rein in investments.

"Likely result of presidential intervention is higher rates as Fed needs to assert its independence", Summers tweeted.

White House economic adviser Larry Kudlow blamed Chinese President Xi Jinping for a lack of progress in bilateral trade talks, saying that lower-ranking officials want a deal.

Later, in a statement, the White House said Trump respects the Fed's independence and is not interfering with its policy decisions.

'I'm ready to go to 500, ' Trump said.

Trump has ordered the Commerce Department to investigate whether auto imports pose a threat to US national security that would justify tariffs or other trade restrictions. The interview was taped Friday afternoon, and CNBC aired Trump's complaints about the Fed shortly after.

The Fed last raised borrowing costs in June.

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