Trump criticises Federal Reserve interest rate policy despite strong economy

Marcus Newton
July 23, 2018

The U.S. dollar weakened on Friday against key world currencies as President Donald Trump complained again about its strength, while U.S. and European stock markets were tepid amid fresh tariff talk and another round of corporate earnings.

Beijing has vowed to hit back dollar-for-dollar and accused the United States of starting the "largest trade war in economic history".

The US economy has so far proven resilient to Mr Trump's threat of taking a trade conflict to the next level.

Mr Trump has said before that he favours low interest rates, and dismissed concerns about his interference.

"We have been ripped off by China for a long time", the U.S. president said.

Around $505 billion of Chinese goods were imported to the 2017, leading to a trade deficit of almost $376 billion, USA government data shows.

"The (yuan's) slide against the US dollar will substantially cushion the impact on Chinese exporters from the planned next round of US tariffs", Rajiv Biswas, chief Asia economist with IHS Markit, told AFP The US dollar, meanwhile, continued its decline against the euro and pound.

On Friday, the yuan dipped to a 12-month low of 6.8 to the dollar, off by 7.6 percent since mid-February.

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His remarks to CNBC were not the first time that Trump has departed from a long-standing practice of USA presidents steering clear of commenting on Fed policy and the value of the dollar.

President Donald Trump made it clear that, if necessary, he is ready to slap tariffs on all imports from China.

Trump defended his comments to CNBC by saying he is "just saying the same thing that I would have said as a private citizen".

"A 25 percent tariff on imported autos and auto parts would only lead to fewer sales, which leads to fewer American jobs", warned Jennifer Adair, a quality team leader at Toyota Motor Manufacturing in Indiana. Earlier this year, he invoked national security as a justification for taxing imported steel and aluminum. On July 20, Trump said that he thought the Federal Reserve raising interest rates undermined the economy.

Despite this, Trump said that the Fed should keep rates low so the US economy could make up lost ground to China.

Trump nominated Powell as Fed chairman a year ago to replace Janet Yellen. "I couldn't care less what they say, because my views haven't changed", he said. In a tweet Friday morning, the president added that "tightening now hurts all that we have done". Fed officials have penciled in two more hikes this year.

The Washington Post says Trump broke with "longstanding practice" by criticizing the Fed, which presidents typically avoid doing "out of respect for the independence of the institution, and to avoid any hint of political influence over the nation's monetary supply". When it came to interest rates, Nixon told his advisers "we'll take inflation if necessary, but we can't take unemployment". Low interest rates reduce the costs of borrowing money and fuel economic expansion, but risk spurring rampant inflation and financial market bubbles.

Other reports by MaliBehiribAe

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