President Trump says he’s ‘not happy’ with interest rate hikes

President Donald Trump on Friday (Jul 20) launched a fresh attack on American trading partners, saying the European Union and China were manipulating their currencies, and he threatened to hit all imports from China with high tariffs. “Look, I’m not doing this for politics”.

While the White House attempted to assuage concerns by reiterating the president’s support for the Fed’s independence, the comments still raised the spectre of a huge policy mistake from the 1970s.

Trump followed up the CNBC comments with a tweet on Friday, in which the president said the Fed’s interest-rate tightening “hurts all that we have done”.

Trump nominated current Fed Chair Powell, who had served as a governor on the board of the Fed, to serve at its helm after Janet Yellen’s retirement in February.

Mr Trump has slapped hefty import taxes on steel and aluminium from the EU, Canada and Mexico, in addition to imposing levies on goods from China worth tens of billions of dollars, sparking retaliatory tariffs and stoking fears of an all-out trade war.

“We think the devaluation is on objective”, Carl Weinberg, chief worldwide economist at High Frequency Economics, wrote in a client note regarding China’s latest currency change. In particular, the Fed’s most recent rate hikes could dilute some of the benefit of the tax cuts Trump signed into law a year ago. “In fact, an argument can be made that the President’s comments may skew the Committee in a hawkish direction: if a decision is a close call then the appearance of kowtowing to the President may bias them toward raising rates”. The central bank has always been seen as needing to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.

“I’m not happy about it”.

It’s always been speculated that the taboo of commenting on USA monetary policy could change under Trump, who slammed the Fed during his election campaign and has demonstrated repeatedly his willingness to flout the conventions and sensibilities of establishment Washington.

“They’re picking the wrong customer, I’ll tell you that – you know how intense he is on this issue”, he said, adding: “Xi seems to think if he waits out the November elections, Trump will be weakened and therefore will lighten the bite”.

Beijing has vowed to hit back dollar-for-dollar and accused the United States of starting the “largest trade war in economic history”.

But his comments raised alarms, including with some former Fed officials who saw in his remarks a possible effort to apply public pressure on the central bank.

The central bank lifted the funds target twice in quarter-percentage-point increments this year, most recently last month, to 1.75%-2%. S&P stock-index futures declined along with the Stoxx Europe 600 gauge after Trump’s comments aired. “No president should interfere with the workings of the Fed”, Fisher said.

Representatives for the Fed could not immediately be reached for comment.