Economy

Trump rails on Fed, notes other countries have negative rates: 'Give me some of that money'

Key Points
  • Trump used his pulpit before the Economic Club of New York to bash the Fed, a diversion from what many hoped would be a positive speech on trade progress.
  • The president claimed that if it weren't for the reluctance of the Fed, the stock market's gains since his election would be significantly higher.
  • Trump also contended that the Fed should continue to cut interest rates to make the U.S. more competitive in the global market.
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Trump: The Fed's hesitation to lower rates has capped market gains

President Donald Trump used his pulpit before the Economic Club of New York on Tuesday to bash the Federal Reserve, a marked diversion from what many on Wall Street had hoped would be a positive speech on the progress of trade relations between the U.S. and China.

Instead of highlighting warmer relations with Beijing, Trump criticized the Fed for what he sees as its hesitation to lower interest rates and blamed the central bank for capping gains in the U.S. economy and stock market.

The president noted that since his election, the S&P 500 is up more than 45%, the Dow Jones Industrial Average is up over 50% and the Nasdaq Composite is up 60%. But those numbers could be way higher, Trump said, if it weren't for the reluctance of the Fed.

"And if we had a Federal Reserve that worked with us, you could have added another 25% to each of those numbers, I guarantee you that," Trump said.

"But we all make mistakes, don't we?" the president added. "Not too often. We do make them on occasion."

It wasn't immediately clear which "mistake" Trump was referencing: His choice to nominate Fed Chair Jerome Powell to lead the central bank or Powell's preferred course of monetary policy.

Trump also contended that the Fed should continue to cut interest rates to make the U.S. more competitive in the global market.

"We are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they pay off their loan, known as negative interest," he said. "Whoever heard of such a thing?"

"Give me some of that," he said. "Give me some of that money. I want some of that money."

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If we don't make a US-China trade deal, we'll raise tariffs: Trump

The president lambasted Powell throughout 2018 (and into 2019) as the Fed continued to tighten monetary policy and raise interest rates, which it typically does when it tries to curb inflation and ease the pace of expansion to prevent the economy from overheating.

Criticism of the Fed is unusual from a sitting president, with prior presidents taking a softer tone or refraining from weighing in on the direction of the central bank's policies. In breaking with that tradition, Trump has blamed the Fed and its leader for swings in the stock market and undermining trade deliberations with Beijing.

"I think the Fed is making a mistake. They are so tight," the president said in October 2018. "I think the Fed has gone crazy."

The Fed instituted nine quarter-point hikes between Dec. 16, 2015, and Dec. 19, 2018, the last time it raised rates. It has cut rates three times in 2019 in what it characterized as a "midcycle adjustment."

To be sure, the U.S. stock market has soared since Trump's victory over Hillary Clinton in 2016, with the S&P 500 up more than 40%. The broad market index touched a new all-time high on Tuesday as investor concern over the U.S.-China trade war eased.

Though investors aren't certain whether the two nations are close to a permanent deal, stocks have rallied to records in recent weeks in expectation of a sort-of trade truce.

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How negative interest rates work