Wednesday, 24 October, 2018

Trump calls stock sell-off a correction, says Fed ‘crazy’

U.S. markets drop sharply as investors are spooked by rising rates Dow Jones plunges 800 points as tech stocks tumble
Priscilla Morrison | 12 October, 2018, 00:16

Rising bond yields have been drawing investors out of the stock market, and the best-performing stocks over the past year took some of the biggest losses on Wednesday.

On Thursday, White House economic adviser Larry Kudlow sought to downplay Trump's comments about the Fed. "No, I think the Fed is making a mistake". "I like to stay uninvolved", Trump said.

The Federal Reserve sets baseline interest rates for lending standards, which can have a massive effect on whether businesses expand or contract.

Technology and internet-based companies are known for their high profit margins, and many have reported explosive growth in recent years, with corresponding gains in their stock prices. Investors worry the Fed might now raise rates faster to head off increases in inflation that could come from rising wages.

The policy could eventually bite harder into parts of the economy that are both sensitive to interest rates and connected to politically important industries, such as autos and home construction and sales.

"We're quite removed from the political process", Powell said in an interview last week at the Atlantic Festival in Washington. "We just try to do the right thing for the medium- to long-term for the country". Economists generally agree that in order to prevent runaway inflation, the Federal Reserve can raise interest rates to restrain the money supply.

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"The rally since early February may be stalling out on confusion about Trump's policies", Ed Yardeni, president and chief investment strategist, and his analysts wrote in a research note.

The central bank's preferred measure of inflation is roughly at policy makers' 2 percent objective, and Powell said last week that "the outlook of forecasters inside and outside the Fed is for more of the same".

The Fed has raised rates three times this year and is expected to push through another rise by the end of December, with three more planned in 2019. "That doesn't seem especially surprising".

Trump himself later told reporters he would not try to oust Powell, Trump's handpicked successor to former Fed chair Janet Yellen, and a well-regarded insider in moderate Republican circles. "I mean I don't know what their problem is but they are raising interest rates and it's ridiculous", Trump said late Wednesday night.

The president has been publicly criticizing the central bank - led by Chairman Jerome Powell, whom he appointed - since July for interest-rate increases and declared he was "not happy" in September after the third rate hike of the year.

"The Fed has gone insane", Mr. Trump told reporters while traveling to Erie, Pennsylvania, for a campaign rally. "Where is the inflation that they are fighting?"

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