Trump takes shot at Fed autonomy, raps rate rise
- Author: Darren Santiago Jul 23, 2018,
Jul 23, 2018, 1:16
President Donald Trump on Friday launched a fresh attack on American trading partners, saying the European Union and China were manipulating their currencies, and he threatened to hit all imports from China with high tariffs.
Higher rates, however, strengthen the dollar against the world's currencies, which makes the United States a more expensive - and potentially less attractive - place to invest.
Trade discussions aimed at defusing tensions between the USA and China have stalled, and Treasury Secretary Steven Mnuchin said the US would only be willing to get back to the table if China agrees to deepen structural changes to its economy.
Mr Trump's comments come before the most recent round of United States tariffs has had time to take effect. He accused Beijing of stealing intellectual property, manipulating the yuan, and exposing illegal export subsidy practices.
After his posts, the USA dollar extended losses against the European Union's euro, the Chinese yuan and Japanese yen.
France's CAC 40 dropped 0.7 percent, Germany's DAX fell 0.5 percent, and Britian's FTSE 100 fell 0.3 percent as both S&P 500 and Dow futures were down between 0.4 and.02 percent.
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Meanwhile, Secretary of State Mike Pompeo said Trump's goal was to "redirect" two countries "that'd been on a bad path". Trump faced harsh criticism from both sides of the aisle, with many describing his comments as disappointing at best.
His remarks to CNBC weren't the first time that Trump has departed from a long-standing practice of US presidents steering clear of commenting on Fed policy and the value of the dollar. "I'm not doing this for politics; I'm doing this to do the right thing for our country". Earlier this year, he invoked national security as a justification for taxing imported steel and aluminum.
Trump said he was concerned about the potential impact on the US economy and American corporate competitiveness from rising rates and a stronger dollar.
Trump nominated Powell as Fed chairman past year to replace Janet Yellen. Within hours of being sworn in as Treasury chief past year, Mr Mnuchin was warned by counterparts from Tokyo to Berlin that the new USA administration should refrain from talking about currencies.
"Tightening now hurts all that we have done", Trump tweeted. When it came to interest rates, Nixon told his advisers "we'll take inflation if necessary, but we can't take unemployment". Fed officials have penciled in two more hikes this year.
After criticising the Federal Reserve for raising the cost of borrowing, he went on to say: "The United States should not be penalized because we are doing so well". The Fed, concerned about too rapid an expansion that is fueled in part by the enormous fiscal stimulus ushered in by the White House, is slowly raising rates to keep the economy from overheating.
The rate rises, which make borrowing more expensive, are meant to head off uncontrolled price rises as the U.S. economy expands.