Trump calls stock sell-off a correction, says Fed ‘crazy’

Stock markets

Stock markets

Central bankers from around the world jumped to the U.S. Federal Reserve's defense after President Donald Trump accused the central bank of going "loco".

"The US equity bloodbath is taking no prisoners in Asia as a sea of red greets investors at the open, as equity deleveraging and liquidation intensifies", he said. "To criticize what the Fed has done is out of line with how the market has reacted to what the Fed has done".

Still, Mr Trump said of Fed Chairman Jerome Powell, "I'm not going to fire him". And the Fed for decades has enjoyed an independence that has shielded it from whatever political storms may be raging at any given time.

Fed Chairman Jerome Powell is aiming to extend the second-longest US economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth.

Jones points to the USA 10-year treasury yield's 40-basis point surge since mid-August as evidence that investors see higher rates on the horizon.

The current benchmark interest rate is 2 to 2.25 percent. Inflation credibility is the foundation of modern monetary policy partly because it gives investors confidence in, and predictability about, the future. "It's all about investors rethinking their exposure to stocks". He's escalating his attacks less than a month before elections that will determine whether Republicans maintain control of Congress. They've also signaled their intent to hike again in December and three more times next year, assuming the economy continues to grow moderately and inflation stays in check.

President Donald Trump says the Federal Reserve "has gone crazy" after a major drop in stock prices Wednesday. "That is what I try to do". "The Fed policy of normalization is exactly the appropriate one", said chairman Jacob Frenkel.

"Under the Obama administration, you had a lot of help because they had very little interest", Trump told reporters at the White House Thursday while responding to questions on the down sliding of the stock market for a second consecutive day. "The Fed has gone insane", Trump said.

They include the United States trade war with China and its potential impact on global growth, while rising bond yields have diverted attention from equities - stocks - which have been offering the most attractive returns for years because central bank stimulus had flooded markets with cheap money. But markets at the time reacted positively to the rate increases and continued to push upwards, reaching even higher valuations as the agency doubled down on rate increases When the markets did finally crash in 2007, the catalyst was not a further decline in Fed rates but the fall of investment bank Bear Stearns.

Trump has little recourse if he wants to make any radical change.

Naeem Aslam, chief market analyst at Think Markets, said: "We have not experienced anything like this since Brexit and if you look at the Nasdaq, it becomes clear that the sell-off was actually triggered by the technology stock".

Trump's most direct way of influencing monetary policy is through appointments. The appointments have been carefully selected by White House staff with an eye toward institution-building. The Fed has two mandates: maximum employment and stable prices.

U.S. investors are suffering their biggest losses since February which have escalated tensions between Trump and Powell. Another Trump pick for the Fed Board is Michelle Bowman, the Kansas banking commissioner who has yet to be confirmed. He also mentioned the Fed is monitoring other risks - "the strength of economies overseas, the effects of ongoing trade disputes, and financial stability issues" - all of which, if they prove real, would suggest less tightening rather than more as a monetary policy response.

"If you're going be anxious about a White House that was going to try to politicize the Fed, then you can think of other people that they might put there besides the people that we choose", Kevin Hassett, chairman of the White House's Council of Economic Advisers, said at the Council on Foreign Relations on October 9. "He knows the Fed is independent and he respects that".

In a sign of how much animosity Trump now holds toward the central bank, Moore said he believes Trump regrets appointing Powell to the position.

So far the central bank has succeeded. Now the Fed's own projections are consistent with the path of rate increases priced into markets.

"If somebody is pushing on you every day, it may affect you", Fischer said in an interview with BNN Bloomberg. He has repeatedly criticized the central bank for raising interest rates this year, decisions aimed at preventing the economy from overheating.

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