WHAT COULD POSSIBLY GO WRONG?
Financial follies and disaster in the making
Despite his earlier grievances with the Fed’s tightening policy, it seems the president is no longer satisfied with the Fed halting rate hikes and ceasing its quantitative tightening program. He now wants the Fed to begin actively easing again and start lowering rates. At an April press conference, Trump said the Fed “really slowed us down” in regard to economic growth, and that “there’s no inflation.” “I think they should drop rates and get rid of quantitative tightening,” he continued. “In terms of quantitative tightening, it should absolutely now be quantitative easing... You would see a rocket ship. Despite that, we’re doing very well.” In short, Trump wants the Fed to return to its most aggressive crisis-level measures simply to boost an already strong economy... an economy that he himself has called “the greatest in U.S. history.” But many regard a return to quantitative easing today as somewhat shortsighted and foolish...
The ‘worst mistake’ of the Trump presidency...
In November 2017, President Donald Trump handpicked Jerome Powell to lead the Federal Reserve, eventually replacing Janet Yellen early last year. It was a strong start to their relationship, but the Trump-Powell honeymoon was brief... Last October, the president said the Fed was “out of control” for continuing to raise interest rates. A month later, Trump followed that up by saying he was “not even a little bit happy” about nominating Powell as chairman and suggested it was among the worst mistakes of his presidency. At the time, it looked like Powell got the message... After 11 months of raising the federal funds rate in an attempt to curb inflation (a policy known as quantitative tightening), Powell announced a sudden reversal. The planned rate hikes for 2019 were no longer certain... and the White House has been relatively quiet about the Fed ever since. Until this month...
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April 2019
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