Today, U.S. President Donald Trump called on the Federal Reserve to push down interest rates into negative territory.
The move is hesitantly used by other world central banks to fight weak economic growth. This also penalizes savers and banks’ earnings in the process.
In a pair of Twitter posts, Trump indicated that negative rates would save the government money on its debt.
He did not tackle the risks or financial market tensions that central banks in Europe and Japan have confronted as a result of their negative rate policy.
Moreover, he also did not mention the larger issue that negative rates have not done much to boost up growth or raise inflation as anticipated.
Trump in a tweet stated, “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.”
He also added, “We have the great currency, power, and balance sheet… The USA should always be paying the … lowest rate. No Inflation!”
Trump, who has repeatedly noted that rates are negative in Germany, Europe’s trading powerhouse likewise said, “it is only the naïveté of (Fed Chairman) Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing.”
The Republican president has long appealed for lower interest rates.
The president also blasted Powell with the Fed for not quickly and drastically cutting them and sees as necessary to boost U.S. economic growth as he eyes re-election next year.
However, Trump indicated last month, in a news report at the White House that he did not want to envision negative rates in the United States.
On Friday, Powell stated the Fed should act appropriately to help sustain the U.S. economic expansion.
This also goes with the political factors who played no role in the central bank’s decision-making process.
In July, Federal Reserve policymakers cut interest rates for the first time in more than a decade.
Meanwhile, Financial markets anticipate the Fed to again lower its benchmark rate, currently at 2.00-2.25%, when it meets next week.
Trump also kept up his strike versus Powell and the Fed. He again tweeted on Wednesday stating, “a once in a lifetime opportunity that we are missing because of ‘Boneheads.'”
In a news report, U.S. Treasury Secretary Steve stated at the White House on Monday he assumed Powell’s job was safe. This was despite months of speculation that the president could seek to oust him and Trump’s name-calling.
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