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White House calls for US Federal Reserve to reverse recent rate hikes

The remarks were part of a new attack the White House has launched against the independent central bank


US federal reserve
US federal reserve

The US President said on Friday that the made a mistake by raising interest rates and blamed the central bank for hurting the and stock market.

“Had the Fed not mistakenly raised interest rates, especially since there is very little inflation, and had they not done the ridiculously timed quantitative tightening, the 3.0 per cent GDP, & Stock Market, would have both been much higher & World Markets would be in a better place!,” Trump tweeted.

The remarks were part of a new attack the has launched against the independent central bank in their unusual public split. The Fed’s Board of Governors did not immediately comment.

No fewer than five Fed officials this week have touted the underlying strength of the American and argued a recent spate of weak data on business activity is more likely to prove fleeting than lasting. None said they currently back a rate cut.

ALSO READ: US' rate hike pause gives room to run the economy, says Fed's Neel Kashkari

Prior administrations have taken care not to comment on Fed policy, but Trump has railed repeatedly against the US central bank’s rate hikes. Friday’s comments were uniquely specific about the course of action now favoured by the president.

The president’s top economic adviser said the would like the Fed to reverse some recent rate hikes and stop shrinking its bond holdings to protect the U.S. from weakness overseas. Some Fed policymakers and other economists have credited US-China trade tensions or tariffs under the current administration as a factor behind the slowdown and market swings.

“This is our view. This is his view. This is my view,” National Economic Council Director Larry Kudlow told CNBC on Friday, confirming that he had told news website Axios that he would like the Fed to cut rates by a half-percentage point and stop cutting its bond holdings.

“The is an independent central bank. They’re going to do what they’re going to do.”

ALSO READ: No surety on status quo, Fed rate hike, cut both on the table: Policymaker

Stephen Moore, a prospective presidential nominee to an open seat on the Fed Board, also weighed in on Friday.

He told Fox News that he would consider reversing the Fed’s December interest rate hike but said he was not necessarily in favor of the half-point rate cut recommended by Kudlow. Moore was quoted as saying he favored such a cut by the New York Times on Tuesday.

The Fed last week brought a three-year rate-hike cycle to an abrupt end as it abandoned projections for any further increases in borrowing costs this year and said it would stop shrinking its bond holdings in September.

The central bank bought bonds in the aftermath of the financial crisis to stimulate the economy but started letting those holdings run off in 2017 in an effort to put its policy back on normal footing.

While Kudlow said he felt the Fed had gone too far with rate hikes, he said the Trump administration was standing by Fed Chairman Jerome Powell.

“He’s our chairman. We’re not going to displace him.”

First Published: Sat, March 30 2019. 20:01 IST