Trump takes aim at Federal Reserve over interest rate hike

Posted December 19, 2018

Trump on Tuesday warned the Fed not to make "yet another mistake" by raising interest rates, the second consecutive day he has gone after the central bank on Twitter.

Economists expect the Federal Reserve to raise interest rates on Wednesday. Trump has been critical of the Fed's plans to increase the rates saying it would damage the economy.

There is a strong rationale for the Fed to raise rates in December, with further hikes in 2019 looking less likely as trade tensions between the United States and China continue to heat up amid a global economy that is showing significant signs of cooling down.

Trump fired off two such tweets this week in the run-up to the Fed meeting.

-China trade war, still-mild inflation, stomach-churning drops in stock prices - may have left Fed officials weighing a shift in policy.

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President Donald Trump fired the latest salvo on December 17 in his campaign to pressure Federal Reserve Chairman Jerome Powell to hold interest rates steady. Similar cycles of rate increases previously have resulted in stock-market crashes or economic recessions.

"Every time we do something great, he raises the interest rates", Mr. Trump said in an October 23 Oval Office interview with The Wall Street Journal, adding that Mr. Powell "almost looks like he's happy raising interest rates".

With U.S. markets showing signs of volatility in recent weeks, Trump has made a decision to stay on offense, touting every victory he can find.

It has raised the rate nine times since 2015, most recently in September, when it increased to 2% to 2.25%. This means the Fed will raise rates by 25 basis points and indicate that going forward, the policy will be data-dependent.

"I just don't think of it", said Mary Daly, president of the San Francisco Fed, in an appearance last week on PBS NewsHour.

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Central bankers are ending the year with a flurry.

Even though the Fed has shed over $370 billion in assets since starting the great unwind, the balance sheet still sits at a gargantuan $4.0 trillion.

The Wall Street Journal editorial said the main argument for a rate pause was that the Fed was unwinding the biggest monetary experiment in history - the prolonged period of zero interest rates and the bond-buying programme known as quantitative easing. Powell will speak at a news conference at 2:30 p.m.

Powell, who was Trump's choice to lead the Fed, has endure increasing public attacks from the president.

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