President Trump apparently won’t be satisfied with the Federal Reserve’s anticipated quarter percentage point interest-rate cut this week, saying the Fed “will do very little by comparison” to Europe and China.
In a tweet Monday morning, Trump said, “The E.U. and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product. In the meantime, and with very low inflation, our Fed does nothing – and probably will do very little by comparison. Too bad!”
Lower rates typically weaken a country’s currency relative to other countries, boosting its exports.
Trump has been jawboning the Fed to lower rates to juice the economy since last year, a strategy that has broken with a 25-year precedent of U.S. presidents refraining from criticism of the Fed to preserve its independence.
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Economists, in fact, do expect the European Central Bank and the People’s Bank of China to lower rates later this year to combat economic slowdowns in those regions.
Analysts initially expected the Fed to cut its key short-term rate by a half percentage point after New York Fed President John Williams said in a speech earlier this month that aggressive action is needed to bolster a weakening economy when interest rates are already low.
But the New York Fed quickly clarified Williams’ remarks were not intended to give a signal about short-term interest rate decisions. St. Louis Fed President James Bullard and Dallas Fed chief Robert Kaplan then signaled they favored a more limited cut.
Some economists don’t believe the Fed should reduce rates at all with the economy growing at about a 2.6% annual rate the first half of the year and adding a better-than-expected 224,000 jobs in June. But amid a slowing global economy, the U.S. trade war with China and stubbornly low inflation, the Fed has signaled that it will vote for an unusual “insurance” rate cut to head off a potential downturn.
The thinking is that with rates already low, the Fed would have little room to cut in case a recession.
Many economists expect the Fed to lower its benchmark rate by another quarter point later this year.