Friday, 19 October, 2018

Trump demands Fed help on economy, complains about interest rate rises

Donald Trump Report Trump ‘Not Thrilled’ with Fed Chairman Powell Over Rate Hikes The Associated Press 20 Aug 2018
Jodi Jackson | 24 August, 2018, 04:14

"While Trump's displeasure for rising interest rates is nothing new, and the Fed maintains full operational independence, markets remain attentive to such comments", wrote strategists at ANZ.

Trump was not charged and Cohen's plea deal does not mean the president has been implicated in anything, press secretary Sarah Sanders said at a White House briefing.

"The question we're getting asked now by investors is whether what we see in EM is a sign that something bigger is going wrong in the global economy".

Asian stocks were capped and the dollar dipped on Tuesday after US President Donald Trump accused China and Europe of manipulating their currencies and said he was "not thrilled" with the Federal Reserve for hiking interest rates. "We strongly doubt that the Fed will change its policy approach based on his cajoling", says Paul Ashworth, chief USA economist at Capital Economics. The benchmark rate is now in a range of 1.75 per cent to 2 per cent, and the Fed has indicated it is likely to hikes rates two more times before the end of the year.

Presidential meddling in monetary policy has a troubling history, most notably President Richard Nixon's insistence that the Fed keep interest rates low ahead of the 1972 election.

Sen. Bob Corker (R-Tenn.) said he also met with Powell last week.

"I think the Fed understands what its role is, and its role is to be an independent body".

The Federal Reserve operates independently of the government, as it is sometimes compelled to make interest-rate decisions that are meant to be good for the economy in the long run but that may be politically unpopular. The currency traded in a range of $1.2994 to $1.3099.

Traders still expect, as they did before Trump's comments, that the Fed will lift rates in September and again in December, at which point short-term term borrowing costs should be somewhere between 2.0 percent and 2.25 percent. Year-on-year earnings growth in the U.S. is expected to be around 24% this year while Europe is forecast to deliver around 9 percent.

Interest rates have been historically low for the past decade as part of the central bank's effort to help the economy recover from the Great Recession, and the increases are an effort to return to normal levels and ward off inflation.

According to Bloomberg, Trump said he expected Powell to be what the news service said was a "cheap-money Fed chairman". He said the Fed was designed so that it would be accountable to policy makers and the public, but it was also created to be somewhat independent from jawboning from the White House.

"I'm very concerned, especially given this very divisive and highly politicised environment, that bringing the Fed into that environment could complicate the Fed's communications [to the public], its support in the Congress and among the American people", said Donald L Kohn, who spent 40 years at the Fed and retired as its vice chairman in 2010.

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