Trump rips Fed, urges rate cuts and zero interest rates

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IANS | 12 Sep, 2019
President Donald Trump renewed his attacks on Federal Reserve policy makers, calling them "Boneheads" and urging that they cut interest rates and even consider taking short-term rates to zero or negative.

"The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term," Trump said in a Twitter post on Wednesday, Efe news reported.

The Federal Reserve's Federal Open Market Committee (FOMC), which sets the US central bank's interest rate policy, is scheduled to hold its next meeting September 17-18.

"It is only the naïveté of Jay Powell and the Federal Reserve that doesn't allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of 'Boneheads,'" Trump tweeted.

The president has been attacking Powell, who he named to head the Federal Reserve, and monetary policy makers for months for not cutting interest rates to stimulate the economy, which is still growing and boasts a strong labour market.

"We have the great currency, power, and balance sheet ... The USA should always be paying the the lowest rate. No Inflation!" Trump tweeted.

On July 31, the FOMC cut the benchmark rate for the first time in 11 years, lowering it to a range of 2 per cent to 2.25 per cent.

The widely expected move marked the first reduction in the federal funds rate since the 2008 financial crisis.

The central bank said US economic activity has been rising at a moderate rate, job gains have been solid and the unemployment rate has remained low, but it justified the move by citing "muted inflation pressures" and "implications of global developments for the economic outlook."

"The outlook for the US economy remains favourable, and this action is designed to support that outlook," Powell said in a news conference after the monetary policy action.

The United States has the highest interest rates among the G7 countries. The European Central Bank (ECB) and the Bank of Japan (BOJ) have both set their benchmark rates below zero.

The US gross domestic product (GDP) grew at an annualized rate of 2 per cent in the second quarter, down from the 3.1 per cent growth registered in the first quarter.

Trump, who wants higher economic growth ahead of his re-election bid in 2020, has repeatedly pressed the Fed in recent months to lower interest rates and thus make it cheaper for businesses and consumers to borrow.

The president has also criticized the Fed for raising interest rates four times in 2018, while the central bank said it was returning its target federal funds rate to a historically normal level after holding it at near zero following the 2008-2009 global recession.