Trump criticises Fed’s interest rate rises

President Donald Trump also voiced his dissatisfaction with the strong US dollar, sending the currency lower

Jerome Powell, chairman of the Federal Reserve, speaks during a House Financial Services Committee hearing, on Capitol Hill in Washington DC, July 18th. President Donald Trump criticised the Fed for raising interest rates, a rare rebuke by a sitting president that upends longstanding executive branch protocol to avoid commenting on monetary policy. Photograph: Al Drago/The New York Times

Jerome Powell, chairman of the Federal Reserve, speaks during a House Financial Services Committee hearing, on Capitol Hill in Washington DC, July 18th. President Donald Trump criticised the Fed for raising interest rates, a rare rebuke by a sitting president that upends longstanding executive branch protocol to avoid commenting on monetary policy. Photograph: Al Drago/The New York Times

 

President Donald Trump criticised the Federal Reserve’s recent interest rate rises and voiced his dissatisfaction with the strong US dollar, sending the currency lower.

“I’m not thrilled,” he said in an interview, according to CNBC. “Because we go up and every time you go up they want to raise rates again. I am not happy about it. But at the same time I’m letting them do what they feel is best.”

The comments broke with the tradition that US presidents do not comment on monetary policy, which is the preserve of a central bank that prizes its independence.

“Now I’m just saying the same thing that I would have said as a private citizen,” Mr Trump said. “So somebody would say, ‘Oh, maybe you shouldn’t say that as president. I couldn’t care less what they say, because my views haven’t changed. I don’t like all of this work that we’re putting into the economy and then I see rates going up,” he said.

Guy LeBas, chief fixed-income strategist at Janney Capital Management, said that while commenting on Fed policy is something past presidents have avoided, “as we all know, President Trump does not adhere to the mould of previous presidents”.

Mr Trump also expressed unhappiness with the strength of the dollar against the euro and the renminbi. “They [THE EU]are making money easy and their currency is falling, and China, their currency is dropping like a rock, and our currency is going up and I have to tell you it puts us at a disadvantage,” Mr Trump said.

Currency markets

Reaction was immediate in the currency market, with the dollar falling 0.7 per cent against the yen and 0.6 per cent against the euro.

The yield on the two-year US Treasury, which is most sensitive to Fed policy, was down 2.4 basis points at 2.5866 per cent, while that on the benchmark 10-year Treasury fell 3.5 bps to 2.8399 per cent. Yields fall as bond prices rise and had already been sliding over the course of today’s session.

Mr Trump’s comments come just a day after Larry Kudlow, Trump’s chief economic adviser, praised the Fed.

“I support what Jay Powell is doing,” Mr Kudlow said during CNBC’s Delivering Alpha conference on Wednesday. “I think the gradualist approach is very good.”

Copyright The Financial Times Limited 2018