Donald Trump says Fed has 'gone crazy' after Dow Industrial Average tumbles

Lloyd Doyle
October 13, 2018

In February, when a selloff caused the S&P 500 to fall 10%, the president switched tactics, claiming the stock market had failed to reflect the strong economy.

Spot gold climbed 0.8 percent to reach $1,203.30 an ounce by 0947 GMT.

USA gold futures gained 1.1 percent to reach $1,206.20 an ounce. Trump's remarks to reporters were in direct response to questions about the stock market drop.

France's CAC 40 and the British FTSE 100 both dropped 1.9 percent and the DAX in Germany lost 1.5 percent.

Bond yields, which have spiked over the last week, slid after the Labor Department said consumer prices grew only slightly in September.

President Trump said Tuesday that he does not like the Federal Reserve's decision to continue to hike interest rates.

In other markets, oil extended declines in Asian trade Thursday following a sharp build in USA crude inventories and fears Hurricane Michael would hurt demand. And there are lingering concerns about the unresolved trade dispute between the USA and China. Strong earnings reports in the upcoming weeks could soothe investor nerves, but any negative comments from company executives about future profits could have the opposite effect.

Dallas Fed President Robert Kaplan said he still favors the central bank raising short-term interest rates three more times before deciding whether more increases will be necessary to keep the economy on an even keel. "He knows the Fed is independent and he respects that".

The breach of norms is not surprising for a real-estate-developer and reality-star-turned-president who has cheered as Wall Street has soared to new heights this year, hitting repeated records, and used that as proof his economic policies were working.

"I do worry about bringing the Fed into what is really a pretty toxic political environment and undermining confidence in the Fed", Kohn said Thursday in a CNBC interview.

"We are getting into that zone where the typical mortgage payment is increasing much faster than incomes, and that's going to put a brake on some markets", said Aaron Terrazas, a senior economist at the real estate site Zillow. Yet other factors, which might have more direct implications for US monetary policy, were also said to have played a part.

The policy makers' latest economic forecasts showed a median estimate of 3% for this neutral point over the long term.

"All bets are off", warned Stephen Innes, head of trading at OANDA, adding that the markets "are fraught with peril". "Interest rates are still accommodative but we are gradually moving to a place where they will be neutral", he said, adding that the USA economy was a "long way from neutral (interest rates) at this point, probably".

"It's a correction that I think is caused by the Federal Reserve with interest rates".

"I don't think there was any new news that came out of the Fed today that wasn't there beforehand", Mnuchin was quoted saying.

During a rally in Pennsylvania on Wednesday night, Trump said he didn't believe the Fed was accurately adjusting its interest rate policy in line with US economic data.

Trump named Powell to lead the central bank but can only fire him for cause.

The rout in United States shares followed substantial losses on European stock exchanges, due in part to tensions between Brussels and Rome over Italian budget plans that have revived fears about the eurozone. Also simmering are the stalled Brexit negotiations between Britain and the EU.

Other reports by Iphone Fresh

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