Trump, Kudlow sing different tunes on the Fed amid market drop

Trader Peter Tuchman works on the floor of the New York Stock Exchange Wednesday Oct. 10 2018. The Dow Jones Industrial Average plunged more than 800 points its worst drop in eight months led by sharp declines in technology stocks. (AP

Trader Peter Tuchman works on the floor of the New York Stock Exchange Wednesday Oct. 10 2018. The Dow Jones Industrial Average plunged more than 800 points its worst drop in eight months led by sharp declines in technology stocks. (AP

The Fed last raised interest rates in September and left intact its plans to steadily tighten monetary policy, as it forecast that the U.S. economy would enjoy at least three more years of economic growth.

But Trump loves to tout good economic news, and either dismisses bad economic news or blames it on the Fed. "I think the Fed has gone insane".

But one unintended effect is that raising interest rates can scare off investors and precipitate a sell off in equities.

Earlier in the day, Trump told the Fox & Friends television broadcast that the central bank was "making a big mistake" by being "too aggressive" in raising rates. "But I really disagree with what the Fed is doing".

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

Trump said Tuesday that the economy is enjoying "record-setting" numbers and "I don't want to slow it down even a little bit, especially when we don't have the problem of inflation".

The IMF chief acknowledged, though, that recent Fed rate increases had been a headache for many emerging economies as capital outflows continued and local currencies kept tumbling.




United States long-dated Treasury yields rose again in extension of a trend over the last few weeks fuelled by solid United States economic data that reinforced expectations of multiple interest rate hikes over the next 12 months.

The stock market has risen markedly since Trump took office, and the unemployment rate has fallen from 4.8 per cent to 3.7 per cent. The Fed is an independent body and presidents in recent decades have avoided commenting publicly on its actions. "I think it's far too fast, far too rigid".

USA stocks gained ground after the inflation report but then headed lower again after White House economic adviser Larry Kudlow told CNBC that no new negotiations have been set with China to reduce trade tensions between the world's two largest economies.

"The Fed increasing rates to me was a sign that the economy was able to stand on its own two feet". "He has never interfered with that". The Dow and the S&P 500, the benchmark for many index funds, both lost more than 3 per cent, and the NASDAQ fell more than 4 per cent. The S&P 500 remained near the lowest since July on Thursday morning, while the Nasdaq 100 rallied.

Trump has slapped tariffs on $250 billion in Chinese goods this year, and Beijing has retaliated with levies $110 billion of American products. Powell said last week he expects to stick with the current path of gradual interest-rate hikes while monitoring risks in the economy. "The Fed is going loco and there is no reason for them to do it and I'm not happy about it". The president is not dictating policy to the Fed.

Raising interest rates was justified "for those economies that are showing much improved growth, inflation that is picking up... unemployment that is extremely low", Lagarde told a press briefing in Bali, Indonesia where the International Monetary Fund is holding its annual meeting. Higher interest rates makes it more expensive to borrow money, giving consumers or businesses pause before taking out a loan.

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