Northwest Arkansas Democrat-Gazette
Mnuchin addresses Fed tweets
Trump’s criticism wasn’t pressure, treasury secretary says
U.S. Treasury Secretary Steven Mnuchin said Saturday that President Donald Trump was not trying to put pressure on the Federal Reserve when he criticized its decision to raise interest rates.
Speaking to reporters on the sidelines of a Group of 20 meeting in Buenos Aires, Argentina, Mnuchin said he can’t comment on why the U.S. president made the comments, but he doesn’t think they were a mistake.
Mnuchin said he’s talked to Trump, and “his intention is not to in any way put pressure on the Fed,” referring to the U.S. central bank.
On Friday morning, Trump for a second day criticized the Federal Reserve. The White House traditionally does not comment on Fed policy out of concern that it could raise doubts in financial markets about the Fed’s commitment to keeping inflation under control.
“The United States should not be penalized because we are doing so well,” Trump said in a tweet. “Tightening now hurts all that we have done.”
In another tweet, the president said: “China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day — taking away our big competitive edge.”
German Finance Minister Olaf Scholz rejected the accusation that currencies are being manipulated.
“The European Union carries out very rational policies, which are not geared at artificially creating economic successes through currency levels,” he told reporters.
Bank of Japan Governor Haruhiko Kuroda didn’t share Trump’s frustration with rising U.S. interest rates and a stronger dollar.
“For the U.S. economy and the global economy, that is not a negative,” he said.
Indeed, allowing the Fed to pursue its own monetary policy is essential, International Monetary Fund Managing Director Christine Lagarde said.
“Independence is key,” Lagarde told reporters in Buenos Aires. “We always value the independence of central banks.”
Last month, the Fed raised its benchmark rate for a second time this year and projected two more increases in 2018. Its rate increases are meant to prevent the economy from overheating and igniting high inflation. But rate increases also make borrowing costlier for households and companies and can weaken the pace of growth.
Trump’s tweet on Friday followed more extensive criticism he made of the Fed’s rate increases in an interview with CNBC in which he said, “I don’t like all of this work that we’re putting into the economy and then I see rates going up.”
Mnuchin’s comments to reporters came at a meeting of finance ministers and central bank presidents from G-20 countries. The United States is being represented at the gathering by Mnuchin and Federal Reserve Chairman Jerome Powell, who was selected last year by Trump to succeed Janet Yellen as Fed chairman after Trump decided not to give Yellen a second term.
The Fed has had no comment on Trump’s interview comments or his tweets, but Powell said in an interview this month that the Fed had a long tradition of conducting policy in a way that is “independent of all political concerns.”
Mnuchin said the overall U.S. economy has not been harmed by trade battles, although he acknowledged that some individual sectors have been hurt.
“Certain countries have targeted very specific levels of things that are not coincidental,” Mnuchin told reporters. “So if you are looking at lobsters in Maine, or you are looking at bourbon in Kentucky, or you are looking at soybeans, there are clearly markets being followed.”
Mnuchin said the administration would be “looking at different opportunities to help the farmers” and provide assistance to other sectors being “unfairly targeted” by tariffs from other nations.
“But I still think from a macro basis, we do not see yet any impact on what’s a very positive growth” performance for the U.S. economy this year, Mnuchin said.
The United States and China are now in a full-blown trade war, with both nations imposing tariffs on billions of dollars of each other’s goods with even bigger tariffs being threatened.
“In the worst-case scenario under current measures,” Lagarde said, the impact on the global economy “is in the range of 0.5 percent” of gross domestic product on a global basis.
South African Reserve Bank Deputy Governor Daniel Mminele said Trump’s comments have begun to hurt the economy.
“The mere talking about it, the ratcheting up of the rhetoric, does affect confidence, does create uncertainty, and will already have influenced behavior even before the first shot was fired,” Mminele said in Buenos Aires.