Fed ‘has gone crazy’ as it raises interest rates

15 October, 2018, 11:11 | Author: Eric Barnett
  • Trump again criticizes Fed rate hikes

The Fed has "gone insane", he said. But as the campaign has continued, the attention of markets has increasingly turned to when the Fed would stop raising rates.

Powell and Trump haven't personally discussed the matter, the Fed chair has said, but Trump's rhetoric has alarmed some Democrats and Republicans on Capitol Hill.

Traditionally, presidents have avoided publicly commenting on Fed policy.

Though Trump said he objected to the Fed's continual rate hikes, he said in response to a question that he would not seek to oust the chairman.

"The president likes low interest rates".

Rates are also going up because the United States government is selling more Treasuries to pay for the soaring federal deficit. Inflation credibility is the foundation of modern monetary policy partly because it gives investors confidence in, and predictability about, the future. Bonds and stocks have sold off since last week Thursday as investors fear the impact of higher borrowing costs on financial conditions.

In recent days, he has escalated his attacks.

Conversely, some worry that the central bank might even raise rates faster than it otherwise would, to demonstrate the independence of its inflation-fighting policy.

New York Fed President John Williams said he expects the Federal Reserve to return to its target interest rate to normal or neutral levels within "the next year or so". "That is what I try to do".

Michelle Smith, a Federal Reserve spokeswoman, declined to comment on Trump's remarks. "I think our nominees have been absolutely first rate". "The Fed is going loco and there's no reason for them to do it", Trump told Fox News. Two thirds of the S&P 500 is in correction territory, he says, while over a quarter is in full bear market territory.

"The Fed has a dual mandate, but one of its unspoken roles is to be the scapegoat", McCarthy said. The Fed is going wild. He can't remove Fed governors, including Powell, except for cause, and the Senate must confirm replacements.

From its beginning, the Fed was created to insulate it from political pressures. "The problem in my opinion is the fed", he added. In a speech in Boston on October 2, Jerome Powell pointed out that at least since 1995, there has been no consistent inverse correlation between low unemployment and rising inflation. The appointments have been carefully selected by White House staff with an eye toward institution-building.

Over the past decade, Wall Street became addicted to easy money. Another Trump pick for the Fed Board is Michelle Bowman, the Kansas banking commissioner who has yet to be confirmed. They have reached out to the Fed leader to ensure there hasn't been improper political interference.

"Markets are not efficient and markets move in both directions and at times they overshoot in both directions", Mnuchin said early yesterday in an interview on the sidelines of the International Monetary Fund annual meetings in Bali, Indonesia.

"Everyone knows the Fed isn't acting insane".

Nonetheless, some see growing risks for the central bank amid the Trump assault. "And all the earmarks of a bust are developing", said Mark Zandi, chief economist of Moody's Analytics. Prices for long-term bonds are more sensitive to rises in rates than short-term ones, because they lock investors into a lower rate for a longer period.


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