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Trump Says Fed Caused Market Rout But He Won't Fire Powell
12 October 2018, 01:26 | Joann Bryant
US markets drop sharply as investors are spooked by rising rates
The Dow tumbled 546 points (2.1 per cent) on Thursday amid heavy selling. While the yield curve remains flat by historical standards (the gap between 10-year and two-year bonds was up to only 0.33 percent in recent days), it has moved in a direction consistent with a more optimistic outlook. London also lost almost 2 percent, Frankfurt fell 1.5 percent, and Tokyo plunged almost 4 percent.
On Wednesday, he discounted the stock market's plunge - with the Dow Jones industrial average falling 831 points. "I'd like our Fed to not be so aggressive because I think they're making a mistake".
"It is a correction that I think it is caused by the Federal Reserve, with interest rates", Trumptold reporters at the White House. While he was generally upbeat about the United States economy, predicting that the good news could continue "effectively indefinitely", when asked on October 3, 2018, what keeps him up at night, Powell said, "Basically everything".
Critics said it was convenient for Trump to blame the Fed when really his trade war with China- which is harming the global economy and raising prices for ordinary Americans - is to blame.
Trump named Powell to lead the central bank but can only fire him for cause.
He doubled down on his attack Thursday, saying the central bank is going "wild" and "loco" with its interest rate trajectory in an interview. After the barrage of complaints from Trump in the past 24 hours, financial markets don't see Fed Chairman Jerome Powell bending to the pressure to slow rate hikes and risk an inflation outbreak.
After President Donald Trump attacked the Federal Reserve over its interest rate hikes on Wednesday, senior officials and banking chiefs have raced to defend the US central bank and its chairman, Jerome Powell.
The rout caused a domino effect worldwide, with losses spreading to Asia and Europe as investors remained concerned about rising rates - which would send more buyers out of equities and into bonds - as well as the impact of Trump's trade conflict with China on corporate profits.
Trump was briefed on the market turmoil earlier in the day, a White House official said.
Finally, investors might want to look at how the Fed is thinking about the assumed relationship between low unemployment, rising wages, inflation and monetary policy.
Kudlow said the Fed was managing 'the transition from ultra, ultra easy money.to something more normal, ' by raising rates gradually.
Trump has repeatedly touted Wall Street records as proof of the success of his economic program.
The attacks on the Fed are another example of Trump breaking with recent norms.
Powell has brushed off the comments, saying officials do not pay attention to politics.
The unemployment rate in September dipped to 3.7 percent, a level not seen in almost half a century, while an inflation report on Thursday indicated the pace of price increases remained under control around the Fed's target. "We just try to do the right thing for the medium- to long-term for the country".
Speaking at the IMF and World Bank annual meetings in Indonesia (as was Frenkel), IMF managing director Christine Lagarde said she "would not associate Jay Powell with craziness", and Powell's counterpart at the Bank of England, Mark Carney, said Powell was "an individual that really understands the plumbing of the US and global financial systems".
O'Hare attributed the losses to worries about higher interest rates but also cited a "broad-scale deterioration in sentiment" as investors realized that the pullback on Wall Street failed to prompt bargain hunting to stabilize prices, as has been the norm in recent years.
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