Trump heaps pressure on the Federal Reserve over interest rate rise

Ann Santiago
December 19, 2018

The majority of US retail investors say the Federal Reserve should stop raising interest rates, according to a survey by Wells Fargo & Co. "If we take these one by one, the list is either null and void or not compelling enough on its own to warrant further sustained tightening by the Fed, in our view", he writes.

The Federal Reserve is poised Wednesday to raise its key interest rate for the fourth time this year.

Many economists also see the Fed increasing rates next year, although at a slower pace in the face of a possible economic recession.

But Jerome Powell, the Fed board member Trump named a year ago as chairman, has drawn the president's ire by overseeing three interest rate hikes this year, pushing the country's key lending rate to a range of 2 to 2.25 percent, a benchmark that helps determine other lending rates on loans for US businesses and consumers and often serves as a guidepost for central banks around the world.

The Monday tweet isn't the first time that Trump has recently taken aim at France.

The Fed began gradually shrinking its balance sheet in 2017 after inflating it to more than US$4 trillion by buying bonds to fight the financial crisis and revive the economy. The criticism breaks from the tradition of previous U.S. presidents, who would avoid weighing in on monetary policy out of respect for the Fed's independence.

In addition, Trump's trade wars, signs China's economy is slowing and the impact of Brexit on an already sluggish European economy add to the sense of global uncertainty that has led stock markets in recent weeks to sell off, wiping out all their gains for the year. What is the "normal" interest rate at this point?

"Every time we do something great, he raises the interest rates", Mr. Trump said in an October 23 Oval Office interview with The Wall Street Journal, adding that Mr. Powell "almost looks like he's happy raising interest rates".

"The only argument I'm hearing for the Fed to raise rates now is somehow they have to exert their independence", he said.

"Now, I'm just saying the same thing that I would have said as a private citizen", he said during the interview.

The Fed's Federal Open Market Committee, the body which sets interest rate policy, will announce its decision at 2 p.m. Wednesday.

Powell himself could provide clarity in his news conference if he indicates where he thinks the "neutral rate" is.

World stocks stabilized Tuesday, with Wall Street expected to edge up after heavy losses the day before, as traders prepare for a likely interest rate hike by the Federal Reserve.

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