After all, Trump has admitted numerous times that low interest rates have been personally good for his real estate empire.
Advertisement
Lael Brainard, a board of governor’s member at the Fed, told an audience in Chicago on Monday that a near-future hike in interest rates is “less compelling” given continued sluggishness in the USA economy.
“Most importantly, China is undergoing a challenging transition from a growth model based on investment, exports, and debt-fueled state-owned enterprises to one driven by consumption, services, and dynamic private businesses”, Brained said at the Chicago Council on Global Affairs. “And with all of the money we have and we are borrowing, do you know what that does to our balance sheet?”
Trump said rates are being kept lower to bolster Obama’s legacy.
“What they’re doing is just – I believe it’s a false market, because money is essentially free”, Trump said. As soon as they go up, the stock market’s going down.
There is every reason to believe Trump’s broadside against the central bank is a political maneuver rather than a genuine policy stance. Clinton at the time said candidates should “not be commenting on Fed actions”. “Words have consequences. Words move markets”.
Despite Minneapolis Fed President Neel Kashkari dismissing the notion that the Fed is a political institution, it really is a tool for the executive branch residing in Washington, D.C. I’m part of the deliberations. At least yesterday – who knows what his beliefs might be today – the Republican presidential candidate accused the Fed without proof of being politically manipulated by the White House, while simultaneously endorsing higher interest rates, which would slow the economy, despite having said the exact opposite four months ago. “We look at the economic data, and everyone around the table – we may have different perspectives on policy – but everyone around the table is committed to achieving our dual mandate”. The Fed’s policymaking board faces just one question ahead of the next meeting on September 20: How quickly to continue their exit from the low-interest rate policies used to boost growth after the 2008 financial crisis?
Currently, a Fed reluctance to raise rates could be interpreted as helping to keep stocks aloft ahead of the election – something that is a clear benefit to the incumbent party and Democratic presidential hopeful Hillary Clinton. “These insane, low interest rates, they’re not always going to be this way … because of market [conditions]”. Investors are fairly uncertain on the direction of the markets, though the main theme seems to be that Central Banks have realised the risks of ultra-loose and accommodative policies and may be looking towards normalising interest rates in the near future.
“Well, I used to think that the Justice Department worked independently, also, and I used to think that the Federal Bureau of Investigation was independent, also, but that’s obviously not possible because Hillary Clinton is guilty as hell, and everybody knows it”, he said. And I used to think that the Federal Bureau of Investigation was independent also. “It’s obvious”, Trump told CNBC.
There are big risks with the Fed using this kind of deliberate approach to its mandates. “And the Fed is obviously not”. He said the long period of low rates had most hurt retirement investors who had expected to draw on savings interest. Now, it’s a very different system and I don’t happen to like that system.
Advertisement
“We need to get growth back up”. On the other hand, last week’s meeting from the European Central Bank brought about some weakness in the euro, as monetary policy was kept the same, with monetary easing measures set to continue.
