Trump criticizes Fed, calls for lower rates amid coronavirus fallout
Donald Trump and Jerome Powell
President Donald Trump on Saturday doubled down on his criticism of the Federal Reserve and what he sees as its reluctance to lower interest rates in the midst of coronavirus fears and its potential impact on the American economy.
“Our Fed should start being a leader,” Trump said at a news conference Saturday from the White House, surrounded by health officials and Vice President Mike Pence. “We should have the lowest interest rates. We don’t have the lowest interest rates. Our Fed rate is higher. You look at Germany, you look at Japan, you look at other countries: many of them have negative rates and we are not put in that position because of our Fed.”
“And now we have this problem,” he said, referring to the coronavirus. “You saw where Germany is lowering and also infusing a lot of money into their economy. I haven’t heard our Fed say they should do this.”
Trump has often blamed what he sees as overly restrictive interest rates imposed by the Fed for undermining the strength of the American economy. The Fed uses its benchmark overnight lending rate and other monetary policy tools to keep inflation in check while fostering full employment.
“We could refinance our debt at even lower rates,” the president added in his White House presser. “Our Fed is making us pay more than we should and that’s ridiculous.”
Federal Reserve Chairman Jerome Powell said on Friday amid the week-long stock market plunge that the central bank is monitoring the risk the coronavirus poses to the U.S. economy. Powell did pledge action if necessary.
“The fundamentals of the U.S. economy remain strong,” Powell said in a mid-day statement. “However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”
The president’s rekindled frustrations with the U.S. central bank follow the worst week for U.S. markets since the financial crisis, with the Dow Jones Industrial Averag and the S&P 500 down 12.36% and 11.49% over the last five trading sessions. This week, both major stock indexes fell into what’s known on Wall Street as a correction, a slide of 10% or more from a recent 52-week high.
But Powell’s statement was short of what some investors were hoping for from the Fed. Many economists on Wall Street now predict the central bank will need to enact several rate cuts this year to combat a coming slowdown. Powell’s language in the Friday statement differed little from previous statements the Fed has made, even before the coronavirus crisis.
Though Trump is suggesting additional remedies that may not be necessary at this time. Refinancing the country’s debt would be an unprecedented act that some economists fear could have unintended consequences for the country’s finances.