Trump says US Fed ‘out of con­trol’ but won’t fire Pow­ell

Muscat Daily - - BUSINESS -

Wash­ing­ton, US – US Pres­i­dent Don­ald Trump re­newed his at­tacks on the US cen­tral bank on Thurs­day, say­ing it was ‘out of con­trol’ in rais­ing in­ter­est rates but that he had no plans to dis­miss US Fed­eral Re­serve chair­man Jerome Pow­ell.

Trump blamed the Fed for the global stocks rout that con­tin­ued on Thurs­day for a sec­ond day amid con­cerns about ris­ing in­ter­est rates.

“It is a cor­rec­tion that I think it is caused by the Fed­eral Re­serve, with in­ter­est rates,” Trump told re­porters at the White House. “I think the Fed is out of con­trol.”

How­ever, asked about Pow­ell’s fu­ture, Trump said, “I’m not go­ing to fire him.”

Trump named Pow­ell to lead the cen­tral bank but can only fire him for cause.

Ear­lier in the day, Trump told the Fox & Friends tele­vi­sion broad­cast that the cen­tral bank was ‘mak­ing a big mis­take’ by be­ing ‘too ag­gres­sive’ in rais­ing rates.

How­ever, he ac­knowl­edged higher rates helped savers.

The com­ments fol­lowed his strong­est crit­i­cism of the Fed late on Wed­nes­day when he said the cen­tral bank had ‘gone crazy’.

US shares fell sharply on Wed­nes­day as the Dow Jones In­dus­trial Av­er­age lost more than 800 points in its worst tum­ble since Fe­bru­ary.

The rout caused a domino ef­fect world­wide, with losses spread­ing to Asia and Europe on Thurs­day as in­vestors re­mained con­cerned about ris­ing rates - which would send more buy­ers out of eq­ui­ties and into bonds - as well as the im­pact of Trump’s trade con­flict with China on cor­po­rate prof­its.

Af­ter a roller coaster ride on Thurs­day, the Dow lost an­other 545 points for a drop of more than two per cent. Lon­don also lost nearly two per cent, Frank­furt fell 1.5 per cent, and Tokyo plunged nearly four per cent.

White House eco­nomic ad­vi­sor Larry Kud­low on Thurs­day said Trump’s opin­ions had no weight on the Fed’s ac­tions.

“We know the Fed is in­de­pen­dent. The Pres­i­dent is not dic­tat­ing pol­icy to the Fed. He didn’t say any­thing re­motely like that,” he said on CNBC.

And Kud­low said the Fed was man­ag­ing ‘the tran­si­tion from ul­tra, ul­tra easy money...to some­thing more nor­mal’, by rais­ing rates grad­u­ally.

Trump has re­peat­edly touted the spate of Wall Street records as proof of the suc­cess of his eco­nomic pro­gramme, in­clud­ing his con­fronta­tional trade strat­egy, and crit­i­cised the Fed for rais­ing the bench­mark in­ter­est rate - three times this year - say­ing it would un­der­mine his ef­forts. In fact it is largely his poli­cies that are be­hind the changes: Tax cuts and in­creased govern­ment spend­ing are ex­pected to juice the econ­omy, adding to the Fed’s jus­ti­fi­ca­tion to raise in­ter­est rates.

Mean­while, trade con­flicts raise costs for com­pa­nies, which could hit the bot­tom line in quar­terly earn­ings - some­thing an­a­lysts said had helped prompt Wed­nes­day’s sell-off.

The at­tacks on the Fed are an­other ex­am­ple of Trump break­ing with re­cent norms. The Fed is an in­de­pen­dent body and pres­i­dents in re­cent decades have avoided com­ment­ing pub­licly on its ac­tions.

Pow­ell has brushed off the com­ments, say­ing of­fi­cials do not pay at­ten­tion to pol­i­tics.

“This is just who we are and I think who we will al­ways be, which is, we’re a group who - we’re quite re­moved from the po­lit­i­cal process,” Pow­ell said in a re­cent in­ter­view.

“And we just try to do the right thing for the medium and longer term for the coun­try.”

De­fend­ing the Fed, In­ter­na­tional Mone­tary Fund chief Chris­tine La­garde said on Thurs­day that rais­ing in­ter­est rates was jus­ti­fied ‘for those economies that are show­ing much im­proved growth, in­fla­tion that is pick­ing up...un­em­ploy­ment that is ex­tremely low’.

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