Wednesday, 14 November, 2018

Trump says he 'maybe' regrets picking Jerome Powell as Fed chief

Chart of Fed Funds rate vs. gold price. Source Trump says he 'maybe' regrets making Powell Fed chairman
Kenneth Drake | 28 October, 2018, 07:44

Framing the state of the economy in personal terms, referring to "my numbers", President Trump blasted Fed chief Jerome Powell and the central bank itself in an interview with the Wall Street Journal.

The us president, Donald Trump has renewed on Tuesday its criticism vis-à-vis the monetary policy of the Fed and of the president of the central Bank, which he accuses of being "happy when he is pushing up interest rates".

Last week, the Fed released minutes of a policy meeting held in late September, which signaled that the central bank would continue to raise interest rates gradually in order to prevent economic overheating.

Trump said it was "too early to tell, but maybe" he regrets nominating Powell last November to succeed Janet Yellen, who departed in February after leading the Fed for four years. He also said he believes the Fed is "the biggest risk" to the economy, because "I think interest rates are being raised too quickly". Trump blamed the nation's central bank for the latest market turmoil, saying the "Fed has gone insane".

"Everyone should be allowed to criticize us and question whether or not we are undertaking the right actions", Chicago Federal Reserve bank President Charles Evans said earlier this month.

The Fed projects one more rate boost in December and three in 2019.


The comments were in response to questions from economist Adam Posen, a former policymaker at the Bank of England, who said Trump's criticisms are "pretty unprecedented for the last couple of decades from a U.S. president".

Trump has called the Fed's policy of gradual interest rate increases "crazy" and the "biggest threat" ahead of midterm congressional elections on Nov 6.

However, Trump made clear that he wants Powell to understand he does not support the Federal Reserve, which is independent from government, and its push to raise interest rates.

"U.S. monetary policy remains accommodative", Clarida said in remarks at the Peterson Institute for International Economics. He feels there is insufficient evidence that inflation will return, and rate hikes are unnecessary at this stage. "I don't know", Trump said.

However, the Fed may still have a point. He feels that this fluctuation in the interest rates will have a negative impact on the economy. I think they all are, to be honest with you. The 2-year has been influenced by the Fed rate path but the 10-year reflects low overseas rates and other concerns, like the weakness in emerging markets and Turkey. But, in the event that Trump actually managed to put a lid on rate hikes, we would probably see asset price inflation, most noticeably in the stock market. The US Dollar index would be the obvious play as the Dollar would weaken against all major currencies.

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