Trump calls on Fed to cut interest rates to zero 'or less'

Trump calls on Fed to cut interest rates to zero 'or less'

President Donald Trump urged the Federal Reserve to lower interest rates to a level typically reserved for recessions or periods of persistently weak growth, suggesting that such a setting could allow the government to refinance Treasury debt at a lower cost. Just last month, the president told reporters he doesn't want negative rates in the US, Reuters reports.

The idea is flawed.

In late July, the Fed lowered the target range for its overnight lending rate to 2 to 2.25 percent, the first rate cut in more than 10 years. Certain treasuries, for instance, fetch prices of as high as $1.40 for every $1 of face value.

The president's comments precede a week in which the world's major central banks, including the Fed, are expected to lower rates or otherwise loosen monetary policy in what is widely seen as a coordinated move to protect the global economy against risks partly rising from Trump's trade war with China.

Trump's post follows release of Washington Post - ABC News poll yesterday that showed majority of Americans fear USA will enter a recession within next year. "A once in a lifetime opportunity that we are missing because of "Boneheads", he said in another tweet.

Trump's reference to refinancing debt followed an online commentary last week by Stephen Moore, who withdrew his candidacy for the Fed board earlier this year.

The Federal Open Market Committee is scheduled to meet again September 17-18, when it is projected to cut rates another 25 basis points (0.25%). Meanwhile, economists in a separate poll predict the European Central Bank will cut its deposit rate to minus 0.5% from minus 0.4% on Thursday.

He also has complained about the Fed's efforts to reduce its massive holdings of securities, that were built up during the 2008 global financial crisis after rates were cut to zero in an attempt to shore up the ravaged economy.

Those who approach monetary policy from a free market perspective mistrust-and see as inherently artificial and manipulative-using Federal Reserve interest rate policy to satisfy short-term political goals. The rate now is in a range of 2 per cent to 2.25 per cent.



Other news