Published: Thu, October 18, 2018
Finance | By Loren Pratt

Fed risks Trump's fury over rate increases

Fed risks Trump's fury over rate increases

Trump blamed the Fed's string of rate hikes for the market turmoil. Critics have expressed concern that his continual attacks on the Fed, which began in the summer, threaten its need to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.

President Donald Trump continued his attacks against the Federal Reserve on Tuesday, calling the Fed his "biggest threat" due to its raising short-term interest rates.

Fed Chairman Jerome Powell was nominated by Trump and approved by a Republican-controlled Senate earlier this year.

The meeting took place three weeks ago - before last week's global market meltdown that saw stocks and bond prices hit sharply amid jitters over rising U.S. rates and the U.S. trade war with China.

Members of the Federal Open Market Committee voted unanimously to raise the benchmark federal funds rate to a range of 2 percent to 2.25 percent last month.

Trump's criticisms mark a departure from the practices of his recent predecessors.

Trump has been critical of Powell, who he appointed to replace former Chair Janet Yellen, saying in August he's "not thrilled" with his performance thus far.

U.S. Treasury Secretary Steven Mnuchin has said that Trump respects the independence of the Fed despite even though he prefers low interest rates, the Associated Press reports. "Obviously, presidents can speak out if they choose to and give their opinions about policy". Traders of futures contracts tied to the Fed's policy rate see rates topping out at about 3 percent.

While criticism of monetary policy by a president has become taboo, Trump isn't alone in questioning why the Fed continues to raise rates while inflation remains tame. But the courts ruled in a case decades ago involving the Federal Trade Commission that this language has to involve more than a policy disagreement between the president and the Fed.

On the other hand, while risks were 'roughly balanced, ' some Fed members said instability in emerging economies - many of which are heavily indebted and vulnerable when United States rates rise - could 'spread more broadly through the global economy and financial markets'.

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