Fed does Obama’s bidding, says Trump

Posted on September 12, 2016

Republican presidential nominee Donald Trump speaks at a campaign rally in Phoenix, Arizona, U.S., August 31, 2016. REUTERS/Carlo Allegri TPX IMAGES OF THE DAY©Reuters

The Republican candidate’s intervention comes amid heightened speculation about the Fed’s next move

Donald Trump stepped up his attacks on the Federal Reserve on Monday, accusing it of bowing to political pressure from the Obama administration by keeping interest rates low and creating a false market in equities with its stimulus policies.

Wading into a period of intensifying market volatility just over a week before the Fed’s next policy meeting, the Republican presidential candidate said Janet Yellen, the Fed chair, was “obviously political and she is doing what Obama wants her to do”. He predicted stocks would slide when the rates finally rose.

    Mr Trump’s intervention comes amid heightened speculation about the Fed’s next move and divisions within the central bank over the right course of action. Lael Brainard, a Fed governor normally seen as dovish, is speaking at 1.15pm US eastern time on Monday to present her views on monetary policy just before the central bank goes silent ahead of its September meeting.

    On Monday, Dennis Lockhart, the president of the Atlanta Fed, said a “serious discussion” over whether to lift interest rates was warranted at the September 20-21 meeting of the Federal Open Market Committee.

    Shares in Europe tumbled on Monday as investors debated how much more appetite central banks around the world had to stimulate their economies. Last week investors were disappointed after Mario Draghi, the European Central Bank president, failed to signal an extension to the bank’s quantitative easing programme.

    “The interest rates are kept down by President Obama,” Mr Trump told CNBC on Monday. “What they are doing is, you know, I believe it is a false market because money is essentially free.”

    He added: “Any increase at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy . . . raise interest rates . . . and watch what happens in the stock market.”

    Savers were being hit by the policy, Mr Trump went on. “The ones that did it right — they saved their money, they cut down on their mortgages . . . now they’re practically getting zero interest on the money that they worked so hard for.”

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    Back in May the property developer warned that he would not reappoint Ms Yellen as Fed chair if he won the presidency, although at that time he said he approved of the central bank’s low rates policies because higher official borrowing costs would drive up the dollar and make it harder to service the US debt. Ms Yellen’s four-year term expires in February 2018.

    Ms Yellen said in June that the central bank did not take politics into account when it set rates after she was asked if the presidential election affected monetary policy.

    Fed policymakers have been debating what the right move should be on September 21 amid mixed indicators on the economy. Ms Yellen said in a speech in Jackson Hole, Wyoming last month that the case for a move had strengthened given firmer jobs growth. But on Friday Daniel Tarullo, a Fed governor, said the Fed had scope to foster a continued improvement in the jobs market without overheating the economy.

    Ms Brainard will be the last Fed governor to speak before the central bank goes into its pre-meeting blackout this week.

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