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Trump says Fed ‘out of control’ but won’t fire Powell
WASHINGTON, Oct 12, 2018 (BSS/AFP) – President Donald Trump renewed his
attacks on the US central bank on Thursday, saying it was “out of control” in
raising interest rates but that he had no plans to dismiss Federal Reserve
Chairman Jerome Powell.
Trump blamed the Federal Reserve for the global stocks rout that continued
Thursday for a second day amid concerns about rising interest rates.
“It is a correction that I think it is caused by the Federal Reserve, with
interest rates,” Trump told reporters at the White House. “I think the Fed is
out of control.”
However, asked about Powell’s future, Trump said, “I’m not going to fire
him.”
Trump named Powell to lead the central bank but can only fire him for
cause.
Earlier in the day, Trump told the Fox & Friends television broadcast that
the central bank was “making a big mistake” by being “too aggressive” in
raising rates.
However, he acknowledged higher rates helped savers.
The comments followed his strongest criticism of the Fed late Wednesday
when he said the central bank had “gone crazy.”
US shares fell sharply on Wednesday as the Dow Jones Industrial Average
lost more than 800 points in its worst tumble since February.
The rout caused a domino effect worldwide, with losses spreading to Asia
and Europe on Thursday as investors remained concerned about rising rates —
which would send more buyers out of equities and into bonds — as well as the
impact of Trump’s trade conflict with China on corporate profits.
After a roller coaster ride Thursday, the Dow lost another 545 points for
a drop of more than two percent. London also lost nearly two percent,
Frankfurt fell 1.5 percent, and Tokyo plunged nearly four percent.
White House economic adviser Larry Kudlow on Thursday said Trump’s
opinions had no weight on the Fed’s actions.
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“We know the Fed is independent. The president is not dictating policy to
the Fed. He didn’t say anything remotely like that,” he said on CNBC.
And Kudlow said the Fed was managing “the transition from ultra, ultra
easy money…to something more normal,” by raising rates gradually.
Trump has repeatedly touted the spate of Wall Street records as proof of
the success of his economic program, including his confrontational trade
strategy, and criticized the Fed for raising the benchmark interest rate —
three times this year — saying it would undermine his efforts.
– ‘Do the right thing’ –
In fact it is largely his policies that are behind the changes: tax cuts
and increased government spending are expected to juice the economy, adding
to the Fed’s justification to raise interest rates.
Meanwhile, trade conflicts raise costs for companies, which could hit the
bottom line in quarterly earnings — something analysts said had helped
prompt Wednesday’s sell-off.
The attacks on the Fed are another example of Trump breaking with recent
norms. The Fed is an independent body and presidents in recent decades have
avoided commenting publicly on its actions.
Powell has brushed off the comments, saying officials do not pay attention
to politics.
“This is just who we are and I think who we will always be, which is,
we’re a group who — we’re quite removed from the political process,” Powell
said in a recent interview.
“And we just try to do the right thing for the medium and longer term for
the country.”
International Monetary Fund chief Christine Lagarde also defended the Fed
on Thursday.
Raising interest rates was justified “for those economies that are showing
much improved growth, inflation that is picking up…unemployment that is
extremely low,” Lagarde told a press briefing in Bali, Indonesia where the
IMF is holding its annual meeting.
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