After Dow nosedives, Trump says "the Fed has gone crazy"

Marcus Newton
October 15, 2018

"They're so tight. I think the Fed has gone insane", Trump told reporters on his way to a rally in Pennsylvania.

The fundamentals of the USA economy are very strong, he added.

Michelle Smith, a Federal Reserve spokeswoman, declined to comment on Trump's remarks.

"No I think the Fed is making a mistake", he said.

"When you talk about economies, our economy is far better than that". Economists generally agree that in order to prevent runaway inflation, the Federal Reserve can raise interest rates to restrain the money supply. Bonds and stocks have sold off since last week Thursday as investors fear the impact of higher borrowing costs on financial conditions. "They're raising interest rates and it's ridiculous".

However, higher United States interests rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt. "I would not associate Jay Powell with craziness", she said. They have reached out to the Fed leader to ensure there hasn't been improper political interference.

In his speech, Mr. Williams noted that with monetary policy moving into a more normal stance, the Fed won't be able to give as much guidance about what will happen. "We expect the Fed will hold on for the ride". "We don't let other things distract us".

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Dramatic and sustained stock market declines can feed into that outlook through a "wealth effect" if they begin to erode household and business confidence, and prompt consumers and investors to curtail spending. "However, with the strength of the U.S. economy and core PCE, the Fed's favourite inflation metric, now in line with its 2% target, the Fed's decision to move away from the ultra-easy monetary policy that characterised the years following the financial crisis is arguably justified".

"No, I'm not going to fire him", Trump said. "Today, the so-called forward-looking federal funds rate is identical to the backward-looking core-inflation rate".

The Fed has raised interest rates three times this year and is largely expected to hike once more before year-end. "That doesn't seem especially surprising".

Mr. Williams nodded toward some of the worldwide concerns about the spillover effects of Fed rate rises by noting that the central bank has a domestic mandate, while adding it does very much take on board how its policies affect other nations. "But I think the fed has gone insane".

Conversely, some worry that the central bank might even raise rates faster than it otherwise would, to demonstrate the independence of its inflation-fighting policy. They've also signaled their intent to hike again in December and three more times next year, assuming the economy continues to grow moderately and inflation stays in check. "The president is concerned about the Fed raising interest rates too much and slowing down the economy and those are obviously natural concerns", Mnuchin said in a CNBC interview from the International Monetary Fund meeting in Bali, Indonesia. "Where is the inflation that they are fighting?"

White House Press Secretary Sarah Sanders said in a statement following the close of markets that the USA economy is "incredibly strong" despite the selloff, which analysts attributed in part to trade tensions with China. Economic growth has improved, and Republicans have taken steps to cut taxes and regulations.

Other reports by MaliBehiribAe

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