Tuesday, 20 November, 2018

Five things to know about Trump's war (of words) on the Fed

Image doomu  iStock Image doomu iStock
Scott Davis | 28 October, 2018, 07:46

U.S. president Donald Trump targeted federal chairman Jerome Powell in his latest tirade against Federal Reserve stating that the organization is the biggest threat to American economy as it is only concerned about raising interest rates that adversely affects borrowing power.

"I believe that trend growth in the economy may well be faster and the structural rate of unemployment lower than I would have thought several years ago", Clarida said at the Peterson Institute for International Economics in Washington, D.C.

While The Federal Reserve Act-amended in 1935-says that the United States president can remove Fed governors who serve 14-year terms, it mentions nothing about the Fed chairman who serves for a four-year term. "They're going to keep keep raising rates", said John Briggs, head of strategy at NatWest Markets.

Trump sidestepped a question on what circumstances would lead him to remove Powell.

"I supported the FOMC's [Federal Open Market Committee] decision last month to raise the target for the federal funds rate to a range of 2 to 2.25 percent", he said October 25 at the Peterson Institute for International Economics, a Washington-based think tank.

Asked Wednesday about the president's broadside against the central bank, Sen.

Powell has so far brushed off the attacks, noting that the Fed is independent and arguing that by raising rates gradually it's just seeking to normalize monetary policy in an "extraordinary" economy.

"Mr Trump also recently said the Fed had "gone crazy" and was öut of control".




Continued volatility in asset prices including stock prices are indicators of financial conditions, he added.

Trump's comments on Tuesday come a week after he described the Fed as his "biggest threat", the Associated Press reported. Powell's actions at the US central bank threaten economic growth, the president says in the interview. The target range for the federal funds rate, now at 2 per cent to 2.25 per cent, is low by historical standards.

Perhaps most significantly, President Richard Nixon replaced Martin with Arthur Burns, who caved in to White House pressure for low rates in what is widely regarded as a policy mistake that fed runaway inflation.

Most officials expect the Fed to raise it again at its December meeting.

Mr Trump said the Fed poses the biggest risk to the USA economy, adding that higher interest rates would slow growth and add to the national debt.

Trump's criticisms mark a departure from the practices of his recent predecessors. The president declined to elaborate, and a spokeswoman for the Fed declined to comment.

"We are not being accommodated", Trump says in an interview with Bloomberg News in the Oval Office.

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