US President Donald Trump on Saturday accused the US Federal Reserve of not being “aggressive” enough to counteract a coronavirus-linked economic slump, while insisting he had no plans to replace the bank’s president, frequently a target of his criticism.
“Other boards and other countries and people representing those countries are taking a much more aggressive action than our Fed, and their equivalent of the Fed rate is lower, in some cases by two points. That’s a lot” Trump told a White House news conference.
“We have the currency, the power... We shouldn’t have a Fed rate that’s higher than our competitor nations,” he said.
Photo: AFP
Trump added that Fed Chairman Jerome Powell had “made a lot of bad decisions, in my opinion.”
Powell was nominated by Trump, but the president has frequently found fault with his stewardship of the central bank, calling him “clueless” and chastising him for not lowering interest rates to supercharge the economy.
“I have the right to remove [Powell],” but “I’m not doing that. No, I’m not doing that,” Trump said.
The Fed on March 3 made an emergency cut in the benchmark borrowing rate, lowering it by a half-point to 1 to 1.25 percent to boost confidence amid growing concerns about the damage the virus is inflicting on US and global economies.
The central bank made the decision without waiting for its regular financial meeting, scheduled for tomorrow and Wednesday, a move it has not made since 2008.
Trump said that a deeper cut in rates would make it possible to “refinance” US government debt “very easily.”
“We have some tremendous opportunities right now, but Jerome Powell is not making it easy,” he said.
On Thursday last week, the Fed announced that it would begin buying longer-term US Treasury debt, rather than just three and six-month bills, which it has been buying at a rate of US$60 billion a month since mid-October last year.
At their two-day meeting starting tomorrow, analysts say the question is not whether the Fed would cut again — that is seen as a certainty — but how low it would go.
“Do they go to zero immediately or wait till April? That’s a hard call,” Grant Thornton LLP chief economist Diane Swonk said.
She said that “cutting rates alone literally cannot cure what ails us,” but “it can help on the other side, it can help blunt the blow.”
The outbreak of COVID-19 has already hammered Wall Street, putting it back into a “bear market” for the first time in 11 years and wiping out more than US$16 trillion in equity worldwide and still counting.
Since breaking out in China late last year, the COVID-19 virus has killed more than 5,700 people and spread globally, with cases topping 150,000, AFP tally showed.
The CME Group Inc puts the odds of another cut at the meeting as a certainty, with almost all respondents saying the central bank is likely to drop the target rate to 0 to 0.25 percent.
A cut to zero would bring monetary policy back to where it was in the global financial crisis, when banks collapsed and the housing market crashed, sending the US into recession.
While the Fed is ill-suited to attack the supply problems caused by the virus, Swonk said that it can still act to ensure banks keep lending as businesses struggle.
“Even though rate cuts alone can’t reopen factories, or make people go to the store, they can help ease the financial strain at a time when financial strains could literally push people through the ice,” she said.
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