Trump Lashes Out at ‘Loco’ Fed Again, Calling Rate Hikes a ‘Mistake’

After a long stretch of relative calm the stock market has suffered sharp losses over the last week

After a long stretch of relative calm the stock market has suffered sharp losses over the last week

Japanese stocks plunged by more than three percent Thursday following the worst session on Wall Street for months, as US President Donald Trump said the Federal Reserve had "gone crazy" with plans for higher interest rates.

"I think we don't have to go as fast", the president answered to a question about the Fed raising rates by CNBC from the south lawn of the White House. "So the Fed is taking its independent course", he said.

The US central bank once again is on the firing line following President Donald Trump's unprecedented attacks but is likely to shrug it off and focus on economic data.

The December tax cuts that Mr Trump championed, as well as the increased federal spending in this year's budget, are expected to do what the president intended by juicing the economy - but when unemployment was already low and the economy growing at a good rate. "I think our nominees have been absolutely first rate".

Trump himself later told reporters he would not try to oust Powell, Trump's handpicked successor to former Fed chair Janet Yellen, and a well-regarded insider in moderate Republican circles.

"I think they're making a big mistake", Trump said during a broadcast of Fox & Friends.

On Thursday, White House economic adviser Larry Kudlow sought to downplay Trump's comments about the Fed.

People are comfortable being short the bond because Fed is still tightening, and because the number of bonds that are coming to us will get bigger.

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But the Federal Reserve has been gradually raising its interest rates since 2015, bringing the target for its benchmark rate to a range of 2% to 2.25% last month.

Further interest-rate increases are "not unreasonable" given the strength of the expansion, said James Knightley, chief global economist at ING Groep NV in London. He likes low interest rates. Trump is concerned that the Fed will raise interest rates too fast and hurt growth, a legitimate issue, he explained. "Interest rates are still accommodative but we are gradually moving to a place where they will be neutral", he said, adding that the United States economy was a "long way from neutral (interest rates) at this point, probably". "The problem in my opinion is Treasuries and the Fed".

The turmoil on stock markets came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets.

If investors are on edge now because of this week's declines, they will be really rattled if the Fed lost its independence.

"The long end of the yield curve has finally moved to the view that this could be a more persistent recovery", said Michelle Meyer, head of US economics at Bank of America-Merrill Lynch. The quick jump in yields in turn spooked equity investors amid fears that rising rates could dent corporate profits, slow economic growth and lead to a slump in stocks. Meanwhile, Ford says that it anticipates about twenty thousand in layoffs and $1 billion in losses thanks to Trump's tariffs.

Can Fed Policy Cause Sudden Stock Market Crashes?

"It wouldn't take much for there to be a significant decline in consumer sentiment that seemingly comes out of nowhere", said Peter Atwater, president of Financial Insyghts. Economic experts are split on how long the strong economy will continue, and some investors are convinced that a number of stocks - particularly technology companies - are overpriced and were due for a slide.

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