Trump calls United States stock sell-off 'a correction'

Daniel Fowler
October 15, 2018

Three have PhDs in economics and three have law degrees.

"It's inevitable that central banks make the decisions that they make", she added as a frenzy of global market selling, triggered by heavy losses on Wall Street and comments by Donald Trump describing U.S. interest rate hikes as "crazy", had rolled into Asia.

"I don't think there was any new news that came out of the Fed today that wasn't there beforehand", Mnuchin said Thursday morning in an interview in Bali, Indonesia.

Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies such as the European Union. He has repeatedly criticized the central bank for raising interest rates this year, decisions aimed at preventing the economy from overheating.

Wednesday President Trump went further and knocked the Federal Reserve for continuing to raise interest rates despite some recent market turbulence. Higher interest rates makes it more expensive to borrow money, giving consumers or businesses pause before taking out a loan.

Stocks have sold off in recent days on worries about higher borrowing costs.

Earlier, Asian markets saw sharp drops as US President Donald Trump said the US Federal Reserve had "gone crazy" with plans for higher interest rates. "The Fed is going loco and there is no reason for them to do it and I'm not happy about it". They have reached out to the Fed leader to ensure there hasn't been improper political interference.

By pitting himself against the Fed, Trump is raising the stakes of a monetary-policy error.

"Everyone knows the Fed isn't acting insane. We don't let other things distract us".

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"Our objective is to increase exports and have a more balanced, fair relationship where our companies can do business there on terms similar to how they do business here", he said, noting that the rise of China's middle class created a "tremendous opportunity" for American businesses in China.

"The risk of late-cycle fiscal stimulus leading to rampant inflation, and causing the Fed to rapidly raise rates, is not playing out just yet", said Jeff Mills, co-chief investment strategist at PNC Financial Services.

"I think they're making a big mistake", Trump said on Fox & Friends. The Fed's main interest rate, the federal funds rate, now stands between 2 and 2.25 per cent.

Among investors in federal funds futures, continued Fed rate hikes remained a solid bet, with a December increase assigned a 78 percent probability - down only 3 percentage points from before Wednesday's market turmoil and Trump's comments. "That doesn't seem especially surprising".

He added that the Fed needed to see a material decline in the economic data before it stopped raising rates.

Treasury Secretary Steven Mnuchin isn't buying the argument that the Federal Reserve triggered Wednesday's steep fall in United States stocks.

Trump himself later told reporters he would not try to oust Powell, Trump's handpicked successor to former Fed chair Janet Yellen, and a well-regarded insider in moderate Republican circles.

Under the guidance of Powell, Trump's pick to lead the central bank, and his predecessor Janet Yellen, Fed officials have raised rates six times since Trump's inauguration in January 2017. "Where is the inflation that they are fighting?" But he downplayed the first major drop in months, saying it was a "correction that we've been waiting for". Economic growth has improved, and Republicans have taken steps to cut taxes and regulations.

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