Trump Breaks Precedent in Criticizing the Fed

Darnell Taylor
July 20, 2018

Asian markets mostly tumbled on Friday tracking a fall on Wall Street after US President Donald Trump criticised the Federal Reserve's interest rate hikes amid lingering fears about a global trade war.

St. Louis Federal Reserve Bank President James Bullard said on Friday the Federal Reserve would remain unaffected by Trump's comments on United States monetary policy.

Mr Trump also suggested that higher interest rates left the United States at a disadvantage when compared to the European Union, China and Japan, allowing their currencies to weaken as the USA dollar strengthens. "As usual, not a level playing field", the president tweeted.

Trump wants Chinese leaders to take action that would lower the $375 billion goods trade deficit that the United States is running with China.

"Tightening now hurts all that we have done", Trump tweeted. The US should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. The latter just yesterday completed the semiannual testimony to Congress on the economy, in which he reiterated the Fed's intention to continue to raise its key policy rate, the federal-funds target, at a gradual pace. After keeping rates at near zero for years, the Fed has hiked its benchmark interest rate seven times since 2015, and more are planned because the US economy is heating up. "I really like President Xi (Jinping) a lot". The Fed has been independent from political interference during its existence, so comments direct as these will undoubtedly stir debate.

The growing share of worldwide trade under threat has raised the prospect the escalating trade war could harm the global economy by disrupting companies supply chains, pushing firms to hold off on investments and making goods more expensive for consumers.

I’m ready to put tariffs on every import from China, Trump warns
The Fed has raised interest rates five times since Trump took office in January 2017, extending the campaign it began in 2015. A Trump-backing farmer in Pennsylvania admits that he's feeling the pinch from the president's trade policies.

Trump earlier this month imposed 25 per cent tariffs on US$34 billion of Chinese goods, with another US$16 billion to follow soon.

The Fed has raised interest rates five times since Trump took office in January 2017, with two of those coming this year under Chairman Jerome Powell, the president's pick to replace Janet Yellen.

Trump argued the Fed's rate hikes went against "all of the work that goes into doing what we're doing".

US President Donald Trump is taking a more aggressive, protectionist posture on trade than his recent predecessors, sparking retaliatory measures from countries around the world and igniting disputes on multiple fronts.

Trump has twice this week weighed in on the Fed's decisions to raise rates, and he expressed displeasure with Fed leadership during his 2016 presidential campaign. "I'm not doing this for politics", Trump said in an interview with CNBC. Both political and economic officials believe that the central bank needs to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.

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