US President Donald Trump called the US Federal Reserve his “biggest threat,” again criticizing the central bank for endangering economic growth through interest rate hikes.
“The Fed is raising rates too fast,” Trump said in an interview on Tuesday with Trish Regan Primetime on the Fox Business Network.
US Federal Reserve Chairman Jerome Powell was earlier this year nominated by Trump and approved by a US Senate controlled by the Republican Party, Trump’s party, earlier this year.
Trump said in the interview that the central bank is “independent so, I don’t speak to them — but I’m not happy with what he’s doing, because it’s going too fast.”
He has repeatedly criticized the Fed for rate increases, ratcheting up his rhetoric in the past few days.
Last week, he slammed the central bank as “out of control” and said it was “going loco,” blaming its monetary policy for a sell-off in the US stock market.
The Fed has this year raised its benchmark policy rate three times, by a quarter-percentage point on each occasion, bringing to six the number of hikes since Trump was inaugurated.
The target range for the federal funds rate, currently at 2 percent to 2.25 percent, is low by historical standards. When factoring in inflation, the rate on short-term borrowing is near zero percent.
Trump’s criticisms mark a departure from the practices of his past few predecessors. Presidents for more than two decades avoided public comments on Fed policy as a way of demonstrating respect for the institution’s independence.
Former US Federal Reserve chair Janet Yellen on Monday said that Trump’s criticism threatens the institution’s independence, adding that it’s “not a desirable thing for a president to comment so explicitly on Fed policy.”
“To politicize it and to undermine that is something that is essentially damaging to the Fed and to financial stability,” said Yellen, whose term as chair expired early this year. “Obviously, presidents can speak out if they choose to and give their opinions about policy. There’s no law against that, but I don’t think it’s wise.”
Trump was more specific on Tuesday in his critique, pointing to low inflation numbers. The Fed’s preferred measure of price pressures rose just 2.2 percent in the 12 months through August, just slightly above the bank’s 2 percent target, and no Fed officials have raised alarm bells over the possibility that it might soon accelerate.
While criticism of monetary policy by a president has become taboo, Trump is not alone in questioning why the Fed continues to raise rates while inflation remains tame.
“The man has a point,” Neil Dutta, an economist at Renaissance Macro Research LLC in New York, wrote in a note to clients after Trump’s remarks were made public. “No one wants the president to opine on the Fed, but if the Fed keeps hiking with inflation below target and limited signs that it is picking up, it would suggest that policy is already neutral or tight.”
Powell and other Fed officials have said that they are trying to balance the risks of causing the economy to overheat by moving too slowly and smothering the second-longest economic expansion on record by hiking too quickly.
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