27 August, 2018
Amid the rising threat of trade wars and the optimism of the looming U.S. and China trade talks, the U.S. President Trump hit out at the Federal Reserve last week.
In an interview with Reuters last week, the U.S. President Trump said that he disagreed with the Federal Reserve's stand on hiking interest rates. He said that the Fed should do "what's good for the country."
The U.S. President who does not shy away from directly criticizing the central bank said that he wasn't thrilled with higher interest rates. When asked whether the central bank should be more accommodating, the U.S. President said, “I should be given some help by the Fed."
Trump also said that he would continue to criticize the Fed if it would continue to raise interest rates.
The Federal Reserve is due to hike interest rates once again this September. This would bring the Fed's short-term funding rate to 2.0% - 2.25%. The central bank is also widely expected to follow through with another rate hike in December. This would bring the U.S. Federal funds rate to 2.50%.
The Federal Reserve has hiked interest rates five times under the Trump administration and the Fed Governor; Jerome Powell was recently nominated by President Trump himself.
The higher interest rates come amid a tightening cycle. The U.S. inflation rate has been around the Fed's 2% inflation target rate, supported by a strong labor market and strong economic growth.
The U.S. second-quarter GDP was recorded at 4.2% as per the initial estimates released a few weeks ago. This comes as the U.S. unemployment rate sits near decade lows.
Trump calls out China and Germany as currency manipulators
Keeping in line with the criticism, the U.S. President also called out China and Germany labeling them as currency manipulators.
However, this was nothing new as the Washington administration has been repeatedly calling out Germany and China for keeping their respective currencies weaker.
Trump also spoke about the sanctions on Turkey and brushed aside concerns about the risks to Europe. He said that there would be no concessions given to Turkey.
The euro had plunged strongly in the immediate aftermath of the Turkey crisis due to its banks' exposure to Turkish debt.
The President has been vocally critical of the Federal Reserve on numerous occasions. He had, also in the past expressed views on the strength on the U.S. dollar. However, the comments about the interest rates come as it is unusual for U.S. Presidents to influence monetary policy.
The U.S. dollar fell following the comments as it did on previous occasions. According to Washington, the central bank's monetary policies are seen to be more beneficial for the U.S. trade partners and that the nation was not getting support from the Fed.
Besides President Trump, the U.S. Treasury Secretary, Steven Mnuchin is also another vocal candidate who had expressed his opinions about the currency’s strength on previous occasions.
“We’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time, I should be given some help by the Fed. The other countries are accommodated,” Trump said.
The decline in the U.S. dollar index came as the currency touched fresh yearly highs just a few weeks ago following the market reaction to the Turkey crisis. However, since then, the U.S. dollar index has given up most of the gains.
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