Trump's attacks on the Fed could backfire, says former official

Trump slams ‘too independent’ Fed as his ‘biggest threat

Reuters Carlos Barria

Rising rates can often depress stock prices by leading investors to shift money out of stocks and into bonds to capture higher yields.

Federal Reserve projections released in September showed policymakers lifting their estimate of that "long run level" to 3%, from 2.9% back in June.

But, amid brisk American expansion, some Fed policymakers also warned of looming dangers to the world economy, such as the potential for a strengthening USA dollar and possible contagion from sputtering emerging markets, according to minutes from the Fed's most recent meeting three weeks ago. As other regions such as the Eurozone get closer to rate increases, the relative opportunities may shift in Europe's favor.

Further rate hikes "would most likely be consistent" with the current period of firming inflation and historically low unemployment, according to the Fed meeting minutes. To avoid this problem, central banks operate independently and their decisions aren't directed by the elected government. He has said the economy is strong and can afford to pay higher interest. "These rates remain low, and my colleagues and I believe that this gradual returning to normal is helping to sustain this strong economy".

"The president has had so many opportunities to make appointments to the Federal Reserve board, and he hasn't appointed people who share his view on what monetary policy should be".

"You are well positioned if the shot comes to your right or to your left", Williams told reporters there. The tools which are at the disposal of the central bank have the capabilities to boost the economy in short-term at the risk of high inflation and adverse consequences in the long term. Any delays would force the Fed to make larger or more frequent rate increases in the future, potentially overshooting its targeted 2 percent inflation rate and risking a recession. They signaled they see at least three more rate hikes as necessary in 2019. The Fed rate has slowly been ratcheting up as the economy has strengthened so they can battle the next economic calamity.

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The president has vehemently expressed his displeasure on multiple occasions.

"The Federal Reserve is getting a little too cute", Trump said in a phone call with Fox & Friends last week, reminding the anchors that even if things might temporarily look grim, the country was doing better by all objective measures than under Barack Obama.

The release of the minutes comes amid growing tensions between the White House and the Fed, which is an independent agency. Trump also said that rising rates were the "biggest threat" to economic expansion during his administration.

"To me the game changer is when the US economy starts to soften and the Fed has to think about cutting rates", said Win Thin, global head of currency strategy at Brown Brothers Harriman in NY.

A spokeswoman for the Fed declined to comment on the president's latest remarks.

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