Fed Members 'Boneheads' For Not Quickly Cutting Rates

  • Fed Members 'Boneheads' For Not Quickly Cutting Rates

Fed Members 'Boneheads' For Not Quickly Cutting Rates

U.S. President Donald Trump on Wednesday said the Federal Reserve should lower U.S. interest rates to "zero or less" to help "refinance our debt" with lower interest costs and a longer term, and blamed the U.S. central bank's chief for missing "A once in a lifetime opportunity".

Those who approach monetary policy from a free market perspective mistrust-and see as inherently artificial and manipulative-using Federal Reserve interest rate policy to satisfy short-term political goals.

Last month, however, Trump told reporters at the White House that he did not want to see negative rates in the U.S., and analysts on Wednesday said the still-growing United States economy would be put at risk if the Fed pursued them. He is apparently trying to put pressure on the Fed by calling for a large rate cut before a policy meeting next week. But cutting to zero would be an extreme move reserved only for a severe economic crisis.

Central banks around the world such as the European Central Bank, the Swiss National Bank and the Bank of Japan have below-zero rates as a means to make loans more enticing to stimulate their sluggish economies. "But the Fed can still go too low; and every usual indicator suggests that setting rates at zero, let alone below, would be setting them way too low". "No Inflation! 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", Trump wrote in a pair of early morning tweets.

While the Fed is not expecting a recession, trade frictions - as well as slower global growth and persistently low inflation - are among the "significant risks" that policy makers are watching, the Fed chair said during a conversation at the University of Zurich on Friday. The stronger dollar tends to make USA exports more expensive.

Editor's note: Should the Fed deploy recession-era monetary policy while the economy is supposedly great and why?