Markets

Trump attacks Fed on eve of policy meeting

Trump attacks Fed on eve of policy meeting”

President Trump continued his months long criticism of the Federal Reserve on Monday, two days before the Fed's closely watched decision on interest rates. "I don't like all of this work that we're putting into the economy, and then I see rates going up, I see China where they're - I mean look at what's happening with their currency, it's dropping like a rock". But the 3.7 percent jobless rate is the lowest in the United States in 49 years, worker wages are increasing and consumers, the backbone of the US economy, are spending. "Fed members will once again decide to squeeze one more rate hike out at the December meeting, while attempting to use the most dovish writing possible to purvey a sense of calmness to markets that they have everything under control", writes Brett Ewing, chief market strategist at First Franklin Financial Services.

Markets have slumped on growing concerns about slowing USA and global economic growth amid rising interest rates and trade tensions between the US and China.

A Fed spokeswoman declined to comment on Mr. Trump's statement Monday.

Dow Jones chart Christmas 2018 interest rates
Dow Jones chart near technical support level

Stock markets continue to be nervous about the risks of a trade war between the United States and China, with fears of protectionism also affecting confidence in Germany, an economy heavily dependent on exports.

The piece, titled "Time for a Fed Pause" suggests that Fed Reserve Chairman Jerome Powell should "ignore the politics, inside and outside the Fed, and follow the signals that suggest a prudent pause in raising rates". Similar cycles of rate increases previously have resulted in stock-market crashes or economic recessions. The benefit of that stimulus will likely fade in 2019, slowing growth to a more modest pace.

"I just don't think of it", said Mary Daly, president of the San Francisco Fed, in an appearance last week on PBS NewsHour.

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The Twitter outburst renewed the president's rock throwing at the central bank, which he accuses of undermining his economic agenda of tax cuts, slashed regulations and multi-front trade offensives.

Even though the Fed has shed over $370 billion in assets since starting the great unwind, the balance sheet still sits at a gargantuan $4.0 trillion.

Powell himself could provide clarity in his news conference if he indicates where he thinks the "neutral rate" is.

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On Tuesday, he urged the Fed to consider a Wall Street Journal editorial that argued for a "prudent pause" in rate hikes.

"Of course the President respects the independence of the Fed".

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