Trump in unusual criticism of USA central bank

Lloyd Doyle
July 23, 2018

The dollar declined on Monday against major currencies to its lowest in more than two weeks after U.S. President Donald Trump criticised the Federal Reserve's tightening policy, while stocks slipped on fears of further trade protectionist measures.

The comments also signaled an undiminished appetite for battle on multiple fronts after a week dominated by coverage of the fallout from his dealings with Russian President Vladimir Putin.

The harsh comments took fresh aim at pillars of the worldwide economic system and underscored Trump's break with long-established norms by again openly rebuking the Federal Reserve for raising interest rates.

The outbursts were another crosswind for Wall Street, which struggled to find direction and finished the day a hair's breadth in negative territory.

"We're down a tremendous amount", said Mr Trump, reiterating his view that China's trade surplus with the United States amounts to unfair trading practices.

On Thursday, the White House was forced to release a statement saying "of course" President Trump respects the "independence" of the Federal Reserve after he blasted the Fed's decision to raise interest rates.

Mr Trump also suggested that higher interest rates left the United States at a disadvantage when compared to the European Union, China and Japan, allowing their currencies to weaken as the U.S. dollar strengthens.

"Trump's comments that he was "ready to go to 500" of tariffs in imports from China; that he was "not thrilled" about the prospects of Fed hikes and that "China, the European Union and others have been manipulating their currencies" saw a volatile close to the week".

'So somebody would say, 'Oh, maybe you shouldn't say that as president.' I couldn't care less what they say because my views haven't changed, ' he told CNBC.

Around $505 billion of Chinese goods were imported to the 2017, leading to a trade deficit of almost $376 billion, USA government data shows.

Last week, Washington listed $200bn (£150bn) worth of additional Chinese products it intends to place tariffs on as soon as September.

Shortly after taking office, Trump withdrew from the Trans-Pacific Partnership (TPP), which he said would steal millions of jobs from Americans, while the North American Free Trade Agreement (NAFTA), signed by Canada, Mexico, and the United States, is now being renegotiated.

Trump added that he was concerned that the Fed's rate hikes may put the United States at a "disadvantage" while the Bank of Japan and the European Central Bank keep their monetary policy loose, CNBC said.

Trump has told reporters before that the US could target all of China's imports.

The growing share of worldwide trade under threat - including the tariffs on autos and auto parts now under consideration - could harm the global economy by disrupting manufacturing supply chains, raising prices and causing firms to hold off on new investments.

Trump indeed said he had 'put a very good man in, ' in reference to Powell, who succeeded Janet Yellen at the Fed.

"Now I'm just saying the same thing that I would have said as a private citizen", he said, according to CNBC. But at the same time I'm letting them do what they feel is best.

He also said that higher interest rates will strengthen the U.S. dollar too much, putting the United States at a "disadvantage" while central banks in Europe and Japan keep rates low.

The US, which is now doing well, should preserve its right to recover what was lost through such practices as illegal currency manipulation and trade deals that were not profitable for the US, the president tweeted.

It had rallied about 1.4 percent on Friday after strong retail sales and inflation data reinforced expectations for another interest rate hike by the Bank of Canada this year. Greenspan did lower rates 13 times over 1991-92, but slowed the pace of cuts in the latter year, much to the White House's annoyance.

To the extent that there has been a depreciation of the renminbi against the dollar there are rational explanations that have nothing to do with China manipulating the currency or using it as a weapon (yet) in the trade conflict.

"One theory is that the PBOC (People's Bank of China) is depreciating the yuan because it has not enough ammunition to fight a dollar-for-dollar increase in tariffs", Francis Tan, an economist at UOB Bank, explained.

The Chinese yuan weakened by almost 1% against the dollar yesterday and continued its slide today, hitting its lowest level in over a year.

Other reports by Iphone Fresh

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