President Donald Trump continued to lash out at the Federal Reserve and urged the nation's central bank to again slash borrowing costs and inject cash into the economy.
"Would be sooo great if the Fed would further lower interest rates and quantitative ease," Trump tweeted.
Quantitative easing (QE), also known as large-scale asset purchases, is a monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to inject liquidity directly into the economy.
Trump also again lobbied for a weaker U.S. dollar.
"The Dollar is very strong against other currencies and there is almost no inflation," he added. "This is the time to do it. Exports would zoom!"
Trump, who has made his economic record the centerpiece of his bid for re-election next year, has maintained a drumbeat attacks on the Fed for not easing monetary policy faster or deeper.
Trump has publicly raged against Chairman Jerome Powell and the Fed for months, complaining about its rate increases during 2018 and continuing to pound the central bank this year even as it has cut rates to keep a record U.S. expansion on track, as the president seeks to deflect blame for slowing growth that many have pinned on his trade war with China, Bloomberg reported.
Powell last week announced the U.S. central bank’s well-telegraphed decision to hold interest rates steady in a range of 1.5% to 1.75%, and signaled borrowing costs would remain there for the foreseeable future.
The Fed cut rates three times from July to October in a mini-easing cycle, designed to sustain the U.S. economic expansion amid slowing global growth and a drop in business investment caused by uncertainty amid the 17-month long U.S.-China trade war.
Fed officials are working to keep inflation, which is short of the central bank's 2% target, from getting too low to give policymakers more room for adjusting monetary policy.
With less than a year until the 2020 vote, the world’s largest economy has been generally holding up this year on resilient consumption. Gross domestic product increased at a 1.9% annualized rate in the third quarter, though that was down from 2% in the second quarter and 3.1% in the opening three months of the year.
Trump said he “protested” U.S. interest rates that he considers too high relative to other developed countries in a meeting last month with Federal Reserve Chairman Jerome Powell.
Powell met with Trump and Treasury Secretary Steven Mnuchin at the White House residence at the president’s request to discuss the economy. It was the second face-to-face encounter this year between Trump and Powell amid the president’s relentless criticism of the U.S. central bank.
Meanwhile, Former Federal Reserve Board Chairman Alan Greenspan criticized Trump's constant attacks on the central bank.
“He’s wrong in even discussing the issue,” Greenspan told CNBC. “The Federal Reserve is a very professional outfit. They know more about the economy’s functioning, how it affects the money markets and the interest rate structure, far more than he does. ... The best thing to do is to just disregard it. I’m sure it was ill-advised.”
Trump tweeted just before Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday that U.S. interest rates should remain at their current levels next year and the labor market can be tighter than previously thought without leading to higher inflation,
"The appropriate path of policy is to stay where we are," Kaplan, who is a voting member of the Fed's rate-setting committee next year, said at an event hosted by the Council on Foreign Relations in New York, adding he had "penciled in" no changes to borrowing costs in 2020, Reuters reported.
The U.S. central bank unanimously voted to leave interest rates steady last week. Previously it had lowered its benchmark overnight lending rate three times this year to counteract harmful impacts on the U.S. economy from slowing global growth and the U.S.-China trade war.
Kaplan previously said he supported the most recent rate cut in October on the condition that the Fed send a signal that no further rate cuts were likely without a substantial change to the economic outlook.
Kaplan said he believed those rate cuts had helped balance risks to the economy compared to earlier this year and that his base case is that the U.S consumer will continue to power the economy in 2020 as long as the job market remains tight. U.S. unemployment is currently near a 50-year low.
Kaplan said he expects the economy to grow about 2% next year and that inflation pressures will remain benign, noting that while he sees the U.S. labor market "at or past full employment," pricing pressures are muted because businesses are not able to pass along higher prices to their customers.
On risks to the economy, Kaplan cautioned that the Trump administration's strategy of using tariff threats against multiple countries poses ongoing uncertainty. While an easing of tensions in the U.S.-China trade war last week was a welcome development, he said, it did not mean tensions are going away.
"'Phase one'" is better than not having a 'phase one' but it doesn't mean there won't still be trade uncertainty," Kaplan said in an interview later on Tuesday with Bloomberg TV. "I think the trade issues with China are going to go on for...years." Other risks to the U.S. outlook he cited included growing levels of corporate debt.
Recent ructions in short-term money markets mean it would be "healthy" for the Fed to revisit some aspects of its stress testing requirements for banks to ease pressure, Kaplan said, although he added he doesn't believe regulators should be easing capital requirements and stress testing for large banks.
"In terms of our testing, sometimes Treasury securities are treated differently than reserves, even though Treasury securities are obviously obligations of the federal government," Kaplan said. "I think looking at that would be a healthy thing."
Reuters previously reported that some banks believe they were getting a green light from supervisors to hold more Treasury debt and less cash, which could encourage them to lend out more reserves and ease some of the recent pressure in short-term funding markets.
This report uses material from Bloomberg and Reuters.
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