Trump Lashes Out at ‘Loco’ Fed Again, Calling Rate Hikes a ‘Mistake’

Ann Santiago
October 14, 2018

"They're so tight. I think the Fed has gone insane", Trump told reporters on the tarmac in Pennsylvania. "They're so tight. I think the Fed has gone insane", Trump said. But he downplayed the first major drop in months, saying it was a "correction that we've been waiting for".

On Wednesday, the Dow fell by more than 800 points, its worst drop in eight months.

So, with higher interest rates and the higher cost of fuel at this point in time, the Fed had created a situation where the market can go into hibernation and just stay where it is for the next few years.

"Diversification is like a shock absorber to weather the storms in the market", Jeanne Thompson, senior vice president at Fidelity Workplace Investing, told CBS MoneyWatch.

Other data have also been stoking inflation expectations - higher energy prices, the September Producers Price Index (up 0.2 per cent), the 4.2-per-cent Q2 GDP growth reported at the end of September.

Last week's jump in yields followed strong U.S. data but many analysts have been anticipating dynamics in the bond market to change due to expectations that central banks in Europe and Japan will soon phase out bond-buying programmes.

Trump previously criticized the Fed for allowing too much money into the economy in several tweets from 2011, before he became the president.

At IMF meetings in Bali, Lagarde said she "would not associate" Fed chair Jerome Powell "with craziness".

US President Donald Trump speaks during a briefing on Hurricane Michael in the Oval Office of the White House in Washington, DC, October 10, 2018.

Firstly the rising trade tensions, as the USA re-orientates its trade policy, throughout this year has weighed on European and Asia markets where companies tend to be more weighted to exporting goods and services, and secondly investors have slowly wised up to the fact that the slowdown being seen in the global economy, is likely to trickle down into potentially lower profit margins at a time when central banks, particularly the Federal Reserve are looking to normalise policy to prevent overheating a U.S. economy getting a bump from a significant fiscal boost. "But I really disagree with what the Fed is doing".

When you see things like this happening - stocks tanking, long-term interest rates rising rapidly, various supposed experts holding forth - it's tempting to run around, shriek and react to what's going on right now.

"I'm not going to fire him", Trump said of Powell, a Trump appointee who legally can only be fired for cause.

Trump blamed the Federal Reserve for the global stocks rout that continued Thursday for a second day amid concerns about rising interest rates. The Fed is going loco, and there is no reason for them to do it and I'm not happy about it. The Dow Jones Industrial Average more than doubled under Presidents Reagan and Obama, more than tripled under President Clinton and fell 27% under President George W. Bush.

He also said that the United States economy does not have an inflation problem and that the central bank is moving too quickly in trying to curb price increases. To President Donald Trump's chagrin, the Fed raised rates on September 26 for the third time this year and the seventh time since Trump was elected, and is hinting at further rate hikes.

Those financial crisis-inspired programmes - such as quantitative easing - are now ending and the Fed has raised USA interest rates three times already this year - raising borrowing costs - and could add a fourth hike by the end of 2018.

There's nothing like watching the stock market take a trillion-dollar one-day loss to get your attention.

After the financial meltdown of 2008, the policy of the Federal Reserve was to keep interest rates low to spur economic activity and revive the general economy.

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