IMF’s chief defends rate hikes after Trump slams ‘crazy’ Fed

Trump says he could do ‘a lot more’ on China trade

NUSA DUA, Indonesia, Oct 11, (Agencies): IMF chief Christine Lagarde on Thursday defended central bank rate hikes in a veiled rebuke to Donald Trump after the US president blamed “crazy” Fed policies for contributing to financial market turmoil.

Lagarde spoke as a global market sell-off rolled into Asia following Trump’s comments, underscoring the rising financial volatility that the IMF will address at its annual meetings with the World Bank this week in Bali.

Lagarde, 62, said central bank rate increases such as those by the policysetting US Federal Reserve were justified by fundamentals – as several central bankers pointed to their need for independence.

“It is clearly a necessary development for those economies that are showing much improved growth, inflation that is picking up ... unemployment that is extremely low,” Lagarde told a press briefing in Bali. “It’s inevitable that central banks make the decisions that they make.” Following a sharp Wall Street sell-off on Wednesday, Trump said the Federal Reserve “is making a mistake.” “I think the Fed has gone crazy,” he said. Trump has repeatedly touted Wall Street record highs as proof of the success of his policies and confrontational trade strategy, and frequently criticises the Fed for gradually raising interest rates, which could squeeze the brakes on equity markets.

“Regulators need to be given the space to act independently, without continuous political interference,” South African Reserve Bank Governor Lesetja Kganyago told a panel in response to questions about Trump’s comments.

Bank of England Governor Mark Carney added: “I think the sanest way to answer that question is to associate myself entirely with Lesetja’s answer.”

The world’s financial elite are on the Indonesian holiday island for a week of talks clouded by the economic outlook.

An IMF report released Wednesday said global growth could be at risk if emerging markets deteriorate further or trade tensions escalate.

Much of the global angst has been dominated by Trump’s escalating tariff war with China and his disdain for world trading norms.

But higher US interest rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.

Lagarde said in Bali that world leaders should fix global trading systems instead of tearing them down, in response to rising nationalist and protectionist impulses.

While defending rate hikes, Lagarde added Thursday that uncoordinated increases in advanced economies were contributing to destabilising capital outflows from emerging markets.

Combined with trade tensions, this had created “a bit of an unprecedented situation” for the world economy, she said.

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WASHINGTON: US President Donald Trump warned on Thursday there was much more he could do that would hurt China’s economy further, showing no signs of backing off an escalating trade war with Beijing.

Trump imposed tariffs on nearly $200 billion of Chinese imports last month and then threatened more levies if China retaliated. China then hit back with tariffs on about $60 billion of US imports.

“It’s had a big impact,” Trump said in a Fox News interview. “Their economy has gone down very substantially and I have a lot more to do if I want to do it.

“I don’t want to do it, but they have to come to the table.”

However, Trump said the Chinese want to negotiate but he does not believe they are ready and he told them so. He blamed previous US presidents for allowing China to pursue unfair trade practices and said he had to tell Beijing, “It’s over.”