Published: Sat, October 13, 2018
Economy | By

Federal Reserve ‘out of control’, says Donald Trump

Federal Reserve ‘out of control’, says Donald Trump

For instance, the September report, which came out on October 5, found the unemployment rate had dropped to 3.7 per cent, a almost 50-year low; wage growth also strengthened. In Japan, 10-year bonds are not even paying 15 basis points.

"I'm paying interest at a high rate because of our Fed", he added, referring to the cost of servicing the U.S. deficit. It is also expected to raise rates again by the end of the year. One is that US bond yields are poised to soar.

Tariffs in the short term is clear that you will be raising prices.

As Hurricane Michael pummeled Florida, Wall Street was battered by storms as well, with the Dow shedding about 830 points, in the biggest fall since February, to close the day at 25,498.74. "If America has a problem, everyone has a problem", Rogers said. "It's reflecting the possibility that this recovery has further legs".

But, crucially, the higher long-term interest rates don't seem to be driven by expectations that inflation will soar higher.

The yields of inflation-protected bonds have moved mostly in lock step with traditional bonds in recent weeks, suggesting that traders haven't become more anxious about inflation. The Fed's main interest rate, the federal funds rate, now stands between 2 and 2.25 per cent.

When you see things like this happening - stocks tanking, long-term interest rates rising rapidly, various supposed experts holding forth - it's tempting to run around, shriek and react to what's going on right now.

"It's not necessary in my opinion, and I think I know about it better than they do", the President said of the decision to increase interest rates. Kaplan is a voting member this year of the Fed's rate-setting committee.

The market's reaction did not go unnoticed at the White House. An increase in interest rates makes debt more expensive, while a corresponding decrease can make it cheaper. Economists generally agree that in order to prevent runaway inflation, the Federal Reserve can raise interest rates to restrain the money supply.

The president said the markets were way up over what they were. "The trend is clearly up, and the market is betting that will continue".

US central bankers have raised the benchmark lending rate three times this year, and investors see more than 70 percent probability of another hike in December.

Of course, there are downsides to the higher rates. On Thursday, he renewed his criticism, blaming the recent downturn in the stock market on the Fed's rate policy.

Interest rates are rising. Housing has already shown softness in some markets in recent months.

"In the absence of a specific trigger, investors are now voting with their feet due to mounting concerns around trade tensions and the impact on global growth, higher interest rates in the US, and a potential rotation away from equities due to rising bond yields", said Richard Hunter, head of markets at Interactive Investor.

In effect, higher mortgage rates could depress the rate of price appreciation of houses, as homebuyers cannot bid as aggressively for properties as they could when rates were lower.

But for all the stock market palpitations and risks to particular interest-rate sensitive industries, the message to take from the recent rise in interest rates is an unambiguously good one: This expansion may have some life in it yet.

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