uploads///Federal Reserve versus Trump

It’s the Federal Reserve versus Trump—Again


Sep. 11 2019, Published 12:07 p.m. ET

  • Today, in his characteristic early morning tweet, President Donald Trump criticized the Federal Reserve and Chairman Jerome Powell.
  • Trump targeting the Fed is nothing new, and the president has been pretty vocal about his displeasure with Powell. Trump blames the Fed’s tightening for slowing down the US economy.
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The Federal Reserve versus Trump

Trump’s early morning tweets have become famous. Generally, his rants are directed at China (and at times Europe), Democrats, the mainstream media, or the Federal Reserve. Many times, US companies such as Apple (AAPL), Amazon (AMZN), Ford, and General Motors have also been in the line of fire. Amazon stands out due to Jeff Bezos’s association with the Washington Post, a major media nemesis for Trump.

Today, Trump directed his ire at the Federal Reserve, tweeting, “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt.” According to Trump’s follow-up tweet, the United States is missing a “once in a lifetime opportunity” due to “boneheads.”

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Trump targeting the Federal Reserve

This is not the first time that Trump has targeted the Fed and its chairman, and we can be reasonably certain that this won’t be the last time. Notably, Trump lashed out at the Federal Reserve even as it lowered rates by 25 basis points in July. At that point, Trump wanted Powell to cut rates aggressively.

As next week’s meeting of the Federal Reserve approaches, we can expect Trump to up the ante by asking Powell to lower rates. Currently, traders are pricing an 88.8% probability of a 25 basis point rate cut in the upcoming meeting.

US economy slowing down

The country’s economic growth has slowed down, and last month’s employment data was also weaker than expected. The manufacturing sector has moved into contraction, and corporate investment activity has been subdued amid the trade war. Amid these trends, Trump has blamed the Federal Reserve for the slowdown.

However, many believe that Trump’s trade war is hurting the US economy. Last month, Apple CEO Tim Cook briefed Trump on how the tariffs would hurt its competitiveness. Plus, Ford and General Motors have not been that excited about Trump’s proposed automotive tariffs.

The Fed’s meeting

Notably, the Fed may take into account the ongoing trade war uncertainty and global easing in deciding the appropriate rates. Earlier this month, China lowered its reserve ratios for banks. Trump sees China’s monetary easing as a ploy to weaken the yuan. However, the Federal Reserve’s easing might not be the answer for the US economic slowdown.


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