President Donald Trump on Wednesday took an indirect shot at Federal Reserve Chairman Jerome Powell when he asked Kevin Warsh, a former candidate for the central bank's top job, why he did not push harder to obtain it.
"Why weren't you more forceful, Kevin? You're a forceful person," Trump said at the signing ceremony of a phase one trade deal between China and the U.S., which Warsh attended. "I could've used you a little bit here."
Trump then talked up the benefits of negative interest rates, which have been implemented by in the European Central Bank and others. Negative interest rates have been used to stimulate economic growth, but whether they have achieved that objective is still being debated by experts.
"This concept is incredible," Trump said. "Again, you don't know where the hell it leads, but you borrow money and, when you have to pay it back, they pay you. This is one that I like very much."
That's not really how it works, though.
In theory, it sounds like lenders, in this case bond holders, are paying rather than receiving interest. In practice, though, negative rates mean that banks that store money at places like the Fed and the European Central Bank would have to pay to keep reserves there rather than get interest.
The U.S. has much higher interest rates than Europe or Japan on a relative basis, but the Fed's overnight lending rate is still close to zero, its historical low from the aftermath in the financial crisis. The Fed also cut rates three times in 2019 after four rate hikes the year before.
Still, "it bothers me when Germany and other countries are getting paid to borrow money. I don't know where all that leads, but we have to pay," Trump said. "We are the No. 1 [economy] in the world, by far, and we have to pay for everything. Our interest rates are set high by the Fed. Our dollar is very high."
Warsh, a former Fed governor, was among the candidates considered to replace Janet Yellen as the central bank's head. Ultimately, Powell replaced Yellen in 2018.
Powell, however, has been subjected to strong criticism from Trump himself for his actions regarding U.S. monetary policy. In 2018, he said the Fed was "crazy" for hiking rates. Last year, he asked in a tweet: "My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?"
Richard Fisher, former Dallas Fed president, told CNBC's "Halftime Report" that Powell will likely not return to his post once his term as chair expires in 2022. This could open the door for Warsh to become the next Fed chair, but Fisher noted: "I hope by then that Kevin has matured a lot since we served together, when he was on the board of governors."