President Trump Brands Federal Reserve U.S. Economy’s ‘Only Problem’
By Olumidagreaton December 24, 2018
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President Donald Trump renewed his attacks on the Federal Reserve, commenting publicly on the central bank for the first time following last week’s interest-rate hike and reports he has discussed firing Chairman Jerome Powell.
“The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders,” Trump said in a tweet Monday. “The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!”
Trump’s latest broadside added to the sense of alarm among investors already rattled by turmoil in Washington that includes his private musings about sacking Powell and the government shutdown that followed his about-face on a stopgap spending bill. U.S. stocks fell back toward their session lows after Trump’s outburst, with the S&P 500 Index falling to its lowest level since April 2017.
The president’s Twitter post didn’t mention Powell, a Trump nominee who has overseen four rate hikes this year to prevent the economy from overheating.
“It’s Christmas Eve and President Trump is plunging the country into chaos,” Democratic leaders Nancy Pelosi and Senator Chuck Schumer said in a joint statement. “The stock market is tanking and the president is waging a personal war on the Federal Reserve — after he just fired the Secretary of Defense.”
Schumer and Pelosi, who takes over as House speaker next month, are facing off against Trump over the government shutdown.
Treasury Secretary Steven Mnuchin sought to reassure investors over the weekend that Powell’s job is safe. He held a conference call Monday with regulators that oversee banks and markets to try, without success, to restore calm.
“The market is lacking full confidence in the Fed right now, but part of it is Trump’s undermining of it,” said Stephen Myrow, managing partner at Beacon Policy Advisors LLC in Washington and former Treasury official under President George W. Bush.
While Fed rate hikes have contributed to equity declines and a softer housing market, the American economy is being buffeted by a few factors owing to the Trump administration and Congress.
Trump’s trade war with China is creating uncertainty for businesses. U.S. government debt is approaching $22 trillion. A federal shutdown this week is raising concerns about Washington’s ability to find bipartisan solutions to pressing problems.
Recent data show economic growth is holding up fairly well but may moderate heading into next year. The labor market is solid and unemployment at 3.7 percent is the lowest since 1969. One measure of U.S. consumer sentiment unexpectedly rose in December as views on economic conditions improved, helping bolster the outlook for American spending.
Gross domestic product is seen expanding 2.9 percent this year, buoyed by tax cuts and higher federal spending signed by Trump, but the pace is expected to slow in 2019 as fiscal stimulus fades. The White House argues lower corporate taxes will boost productivity and help the economy grow faster without causing inflation, and therefore the Fed doesn’t need to tighten policy.
The turmoil engulfing Washington — and the financial market rout that’s happening in response — widened after Bloomberg News, late Friday, reported Trump’s discussion about firing Powell. Mnuchin said in a pair of tweets Saturday evening that he’d spoken with the president about the matter, and he quoted Trump saying he didn’t believe he had the authority to remove the central bank chief.
Mick Mulvaney, Trump’s pick for the next White House chief of staff, said Sunday he’d spoken to Mnuchin and that Trump “now realizes he does not have the ability” to fire a Fed chairman.
Trump has yet to publicly affirm that belief himself.