Published: Thu, October 11, 2018
Economy | By

USA markets drop sharply as investors are spooked by rising rates

USA markets drop sharply as investors are spooked by rising rates

The president told reporters Wednesday that he believed the drop was a correction, and that the Federal Reserve Bank was to blame for raising interest rates.

"I think. the Fed is making a mistake. They're so tight. I think Fed has gone insane", president Trump replied.

The president said of the market losses, "Actually, it's a correction that we've been waiting for a long time".

Mr Trump said: "I like to see low interest rates". "But I really disagree with what the Fed is doing, okay?"

The Dow Jones industrial average dropped 3.1 percent, or 831 points, to land at 25,599. The Fed has predicted that unemployment will remain below 4 percent through 2020 and inflation is expected to track around 2 percent, conditions that Federal Reserve chief Jerome H. Powell called "remarkably positive".

Trump previously criticized the Fed for allowing too much money into the economy in several tweets from 2011, before he became the president.

The turmoil on stock markets came a day after the International Monetary Fund slashed its global growth forecast on worries about trade wars and weakness in emerging markets.


Fed spokeswoman Michelle Smith declined to comment on Trump's remarks.

The steep drop in Japan followed a decline on Wall Street of almost 830 points, the biggest fall since February, amid Trump's latest criticism of the Federal Reserve, the U.S. central bank.

"Clearly stocks are spooked by higher rates and maybe some inflation that seems to be creeping in", said Michael Farr, CEO of Farr, Miller & Washington. Officials expect to hike rates another quarter percentage-point by the end of this year and gradually continue to raise rates at least through 2019.

White House Press Secretary Sarah Sanders said in a statement following the close of markets that the US economy is "incredibly strong" despite the selloff, which analysts attributed in part to trade tensions with China.

Stocks have been under pressure since the yield on 10-year US Treasury bonds jumped above 3% last week, a sudden move that raised fears of an overheating economy, speeding inflation and more aggressive Federal Reserve interest rate increases.

Trump's comments echo his previous criticisms of recent months, which broke more than two decades of White House tradition of avoiding comments on monetary policy out of respect for the independence of the US central bank. "President Trump's economic policies are the reasons for these historic successes and they have created a solid base for continued growth".

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