Published: Fri, August 09, 2019
Markets | By Otis Pena

Trump drumfire against the Fed continues

Trump drumfire against the Fed continues

Fed chairman Jerome Powell said the most recent interest rate cut was needed to bolster economic growth threatened by uncertainty in USA trade policy.

According to the latest Reuters poll, USA economic growth was forecast to slow to an annualised rate of 1.8% by end-2020 from the 2.1% reported for last quarter and well below the 3.1% rate in the first.

Trump's press for a weaker dollar comes as a so-called currency war has broken out globally as other nations also seek to weaken their currencies.

"That's worrisome, because it's not clear that the Fed can offset everything that the trade war does to damage the economy and there's room for error there", he said.

"I would have maybe anticipated even more [stock market losses], but ultimately, it's going to go much higher than it ever would have gone, because China was like an anchor on us", the president said.

Beijing censures US ban on Chinese firms as 'abuse of state power'
An American Congressman has, however, alleged that China is "blackmailing" India and several other countries into using Huawei. During the meeting, Beijing also allegedly said that it hoped India would make its own "independent and objective decision".

Indeed, Federal Reserve Bank of St. Louis President James Bullard said this week that the central bank would not deliver an interest rate cut each time there were policy threats or announcements on the trade war that roiled markets.

"Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)". According to Trump, the interest rate level held high by the Fed keeps the Dollar high compared to other countries.

Moore noted that the Chinese economy would suffer significantly because of trade tensions, however, "they might take the American economy down with them". Almost 72 percent of traders expect the Fed to lower the rate by 25 basis points and the remaining 28 percent expect a cut of 50 basis points. "The increase in uncertainty affects business investment". Those tensions jumped up a notch when Trump announced the next day that he was prepared to widen tariffs against China on September 1, and Beijing retaliated. Investors took the view that deeper Fed easing was needed and US stocks fell. "US monetary policy can not reasonably react to the day-to-day give-and-take of trade negotiations", Bullard said in a presentation in Washington on Tuesday.

Central bank chief Jerome Powell would not commit to further loosening policy, describing the last move as only a "midcycle adjustment".

The Republican president has for months been calling on Fed Chairman Jerome Powell and Fed policymakers to lower interest rates to support the USA economy.

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