Saturday, 20 October, 2018

President Trump blames 'loco' Federal Reserve for October's big stock drop

Beginning of the end? US equities sell-off wave affecting global economy- Jim Rogers Reuters Yuri Gripas
Priscilla Morrison | 13 October, 2018, 01:11

President Donald Trump has blamed an "out of control" Federal Reserve for sharp drops on global stock exchanges and said he was "disappointed" with the central bank's chair, Jerome Powell.

President Donald Trump is criticizing his hand-picked Federal Reserve chief at a time when interest rates show few signs of hindering the USA economic expansion.

For example, experts say that the roots of the 2008 financial crisis date back to 2000, when the federal agency began slashing interest rates.

"The Fed has gone insane", he told reporters on Wednesday as he arrived in Pennsylvania for a campaign rally.

"I think the Fed is making a mistake".

"The Fed's more-restrictive stance has joined with other signals to unsettle investors even as major U.S. indexes rose to new highs", the financial daily said.

Meanwhile, yields in Europe remain suppressed: the European Central Bank is planning to stop its bond-buying program by the end of this year, but it's not going to start unwinding its $3.8-trillion bond holdings anytime soon.

Last week's jump in yields followed strong U.S. data but many analysts have been anticipating dynamics in the bond market to change due to expectations that central banks in Europe and Japan will soon phase out bond-buying programs.

While acknowledging that higher rates helped savers, he criticised the Federal Reserve's moves.

President Donald Trump said he believes "the Fed has gone crazy" amid recent interest rate hikes.

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At the closing bell, the Dow Jones Industrial Average was at 25,049.65, down 2.1 percent or 545 points, bringing its losses for the week to more than five percent.

USA stocks tumbled Wednesday the most since February as fresh concern about the impact of the trade war with China roiled technology and industrial shares. USA stocks opened lower on Thursday but seesawed between losses of as much as a percentage point and small gains. The Kospi in South Korea fell 4.4 percent.

White House economic adviser Larry Kudlow on Thursday said Trump's opinions had no weight on the Fed's actions.

"We know the Fed is independent", Kudlow said. So it's a great time to be a borrower, and a lousy time to be a saver because Fed policy is tightening at a slow and gradual rate.

Why? Because long rates, which have been rising gradually all year before bursting into public view last week, had been held at artificially low levels for years by the Federal Reserve's so-called quantitative easing.

Jones points to the US 10-year treasury yield's 40-basis point surge since mid-August as evidence that investors see higher rates on the horizon.

U.S. long-dated Treasury yields rose again in extension of a trend over the last few weeks fuelled by solid United States economic data that reinforced expectations of multiple interest rate hikes over the next 12 months.

"And we just try to do the right thing for the medium and longer term for the country", said Mr Powell.

The sell-off came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.

"It is clearly a necessary development for economies that are showing much improved growth, with inflation picking up and unemployment being extremely low", she argued.

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