US President Donald Trump has just called the Federal Reserve and its chairman “pathetic,” stating:
“Our pathetic, slow moving Federal Reserve, headed by Jay Powell, who raised rates too fast and lowered too late, should get our Fed Rate down to the levels of our competitor nations. They now have as much as a two point advantage, with even bigger currency help. Also, stimulate!”
By competitor nations in this case he presumably means Europe where central bank interest rates are at zero.
The Federal Reserve interest rate was lowered recently to 1.25, cut in half from 2.5 last year, due to potential risks posed by corona.
Trump is clearly suggesting he wants it to go to 0 in addition to the president stating he is looking at a payroll tax cut.
“Ronald Reagan’s great economist, the recipient of the Presidential Medal of Freedom, has just said great things about a Payroll Tax Cut,” Trump said.
Just how much this would cost for the already deeply indebted government that pays hundreds of billions in interest for the $23 trillion debt, is not clear.
Yet following the interest rate tax cut and a flight to safety, bond yields have plunged, making government borrowing very cheap.
Trump clearly wants it to be even cheaper with Fed doing so far pretty much everything he has asked.
Trump wanted Fed to stop raising rates, and they did. To start printing, and they did. Then to cut rates, and they did a bit but last week they slashed it by 50 points. Now, whether they will send it to zero, remains to be seen.