Trump demands interest rate be cut to zero or less

Trump demands interest rate be cut to zero or less

Trump demands interest rate be cut to zero or less

"President Trump's call for zero or even negative (!) interest rates would not be medicine, but in fact poison, for the long-term health of the economy".

President Donald Trump urged the Federal Reserve to lower interest rates to a level typically reserved for recessions or periods of persistently weak growth, suggesting that such a setting could allow the government to refinance Treasury debt at a lower cost. As it becomes increasingly apparent that the USA economy has slowed in 2019, Mr Trump has publicly berated Fed chair Jerome Powell and the central bank for failing to loosen monetary policy fast enough.

"We have the great currency, power, and balance sheet", Mr Trump said in announcing that the "Federal Reserve should get our interest rates down to ZERO, or less". What if a recession hits with rates already at or near zero, and should the Fed go with negative rates?

Trump has often bragged about his use of debt as a real estate investor. The rate now is in a range of 2 per cent to 2.25 per cent.

Still, interest accounts for about 8.7 percent of all federal outlays, down sharply from the mid-1990s, when it accounted for more than 15 percent of spending following an era of ultra-high interest rates in the 1970s and 1980s, the Pew data showed.

Meanwhile, even though Trump hand-picked Powell as head of the United States central bank, he quickly soured on his by-the-book approach and insistence on the Fed's political independence. "A once in a lifetime opportunity that we are missing because of "Boneheads", he said in another tweet.

The Fed cut the benchmark interest rate in July for the first time in more than a decade, partly as insurance against the impact of trade uncertainties on the economy. He is apparently trying to put pressure on the Fed by calling for a large rate cut before a policy meeting next week.

Policy makers are widely expected to make another quarter-point cut when they next meet September 17-18, though hardly anyone sees interest rates headed to zero in the next two years, according to a Bloomberg survey earlier this month. But cutting to zero would be an extreme move reserved only for a severe economic crisis.

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