US President Trump calls the US Fed 'crazy', stock declines a 'correction'

Oscar PerryOct 12, 2018

The yield on 10-year U.S. Treasury bonds reached a seven-year high this week of 3.25 percent (it receded some Wednesday as stocks dropped), up from 2.82 percent in August.

White House officials, including Mr Trump, have dismissed the declines as standard corrections after a long run of rising share prices. Trump instead has placed blame squarely with the Fed. Three have PhDs in economics and three have law degrees. "I think we don't have to go as fast".

"The tax cuts juiced earnings this year and that's not sustainable, " he said. The Fed's effort to shrink its balance sheet is creating added uncertainty, since it's unclear how the central bank's reduction in its bond portfolio will affect markets, he said. "It is doing well", Trump said. Higher interest rates could increase his debt payments considerably. It is often tied to higher costs of borrowing for the federal government, which can spook investors. Some 30-year fixed-rate mortgages are now offered with an interest rate above 5 per cent, significantly higher than when Trump took office. The president is not dictating policy to the Fed. "The Fed is going loco and there's no reason for them to do it and I'm not happy about it".

"We're quite removed from the political process", Powell said in an interview last week at the Atlantic Festival in Washington.

"And we just try to do the right thing for the medium and longer term for the country". "We don't let other things distract us".

Trump indicated he had not spoken with Powell.

Jasper Lawler, head of research at London Capital Group, offered this explanation: "The bloodbath for global equities comes as investors adjust to a world of higher United States interest rates and USA treasury yields".

The 10-year yield is now 3.20 percent, the highest in than seven years and up sharply form 2.82 percent in late August.

He said the stock-market drop is "a correction that I think is caused by the Federal Reserve with interest rates". "That doesn't seem especially surprising".

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He adds, "I think the Fed has gone insane".

Some of his former advisers said they believed Trump's criticisms of the central bank were warranted.

"Of the many qualities of Jerome Powell is he's an individual who really understands the plumbing of the USA and the global financial system", Carney said.

He said the Federal Reserve was being "too aggressive" by raising interest rates this year and getting "a little bit too cute". "Where is the inflation that they are fighting?"

Trump himself later told reporters he would not try to oust Powell, Trump's handpicked successor to former Fed chair Janet Yellen, and a well-regarded insider in moderate Republican circles.

The tech sector was hit hardest, with Amazon, Apple, Facebook and Netflix all in the red.

"He knows the Fed is independent and he respects that".

Fed Chair Jerome Powell, whom Trump named to lead the central bank, has repeatedly brushed off the comments saying officials do not pay attention to politics.

"I don't think he's calling out the Fed, quote-unquote".

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