US President Donald Trump has called US Federal Reserve policymakers “boneheads” and demanded that they drop interest rates to zero “or less”.
Trump said close-to-zero interest rates would let the US refinance its debt, meaning replace its existing debt with debt that carries a lower interest rate.
Renewing his unprecedented public attack on the Fed and its chair Jay Powell via Twitter, he said: “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.”
“We have the great currency, power, and balance sheet….. The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.””
Trump’s latest attempt to influence the independent Fed comes as the central bank’s Federal Open Market Committee (FOMC) prepares to meet to set US interest rates next week.
At its last meeting in July, the FOMC cut interest rates by 25 basis points (0.25 percentage points) to between two and 2.25 per cent.
Traders think there is over a 90 per cent chance that the Fed will cut interest rates again, according to CME Group’s Fedwatch gauge which is based on futures trading.
Deutsche Bank analyst Jim Reid said he thinks “the Fed will cut rates another 100 basis points over the next several months”.
Last month, Powell noted in a major speech last month that the US-China trade war, the growing possibility of a hard Brexit, tensions in Hong Kong, and the dissolution of the Italian government were all threats to growth.
Yet he failed to signal a heavy interest rate cut, causing Trump to respond furiously via Twitter.
He tweeted: “We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great…”
“….My only question is, who is our bigger enemy, Jay Powel or Chairman Xi?”