Trump rips Fed for raising interest rates

US President Donald Trump. – AP

US President Donald Trump. – AP

U.S. President Donald Trump on Friday dug in on his criticism of the Federal Reserve's policy on raising interest rates, saying it takes away from the United States' "big competitive edge", Reuters reports. In a portion of the interview that aired Thursday, the president said he wasn't happy about Fed rate increases.

"I don't want them to be scared", he told CNBC.

Earlier this month, the United States levied tariffs on $34 billion worth of Chinese goods, prompting retaliation from China that has hit US farmers particularly hard, including in states that Trump won in 2016.

The US dollar lost ground against rival currencies following the comments. Mr. Trump's fiscal policies, which are projected to stimulate growth this year and next, have also given the Fed greater conviction to continue with rate increases.

The Fed has raised rates twice this year and is expected to raise rates a couple more times by year end which may attract more foreign into the US dollar with monetary policy remaining loose in Europe and Japan, analysts said.

Powell and other Fed policymakers nearly certainly will not allow themselves to be consciously influenced by Trump's comments, says Peter Conti-Brown, a professor of legal studies and business ethics at the Wharton School in Philadelphia.

Beijing is targeting sectors, like agriculture, that could harm Trump politically at home, though he said in the CNBC interview that he is seeking to do only what is fair.

President Donald Trump pauses during his meeting with members of his Cabinet in the Cabinet Room of the White House Wednesday.

Responding to the president's latest comments, the White House economic adviser Larry Kudlow told the news website Axios that provoking Trump would be a mistake for China. "He doesn't want to move, and they've offered the USA options regarding the issue of (intellectual property) theft and forced technology transfer", Kudlow said in an interview with the news outlet. "I'm ready to go to 500".

Trump's comments come amid a multitude of trade threats between major economies around the globe and after his initial tariffs on Chinese goods sparked a major conflict.

"The Fed is responding to the inputs that have been provided: stronger fiscal stimulus should imply stronger growth", said Mazen Issa, senior FX strategist TD Securities in NY. For a long, long time the Fed has felt it important to conduct our business that way.

He likewise also took aim at the dollar, saying a higher value "puts us at a disadvantage" and adding that the Chinese yuan "has been dropping like a rock".

But one JPMorgan economists thinks Trump's public desire for lower interest rates could actually backfire. "I just want to assure you this was not meant to put pressure on the Fed or jeopardize the Fed's independence". US stock prices briefly pared losses after Trump's comments on interest rates.

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