Dollar slides after President Trump’s criticism of the Federal Reserve
President Trump’s criticised the US Federal Reserve yesterday, prompting a downward slide of the dollar to its lowest level for nearly a fortnight.
The president commented that he was unhappy with interest rate increase pursued by the Fed and singled out chairman Jerome Powell. “I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” said Trump to the Reuters news agency.
Powell was nominated by the president last year to replace Janet Yellen. Asked by Reuters for his opinion on the chairman, Trump said: “Am I happy with my choice?” “I’ll let you know in seven years.”
Trump has history of criticising the Fed, as a candidate and a president, though the Reserve has asserted its independence from the politics of the administration. Powell has said previously that the Fed is apolitical and its policies are based upon detailed research. Asked if he believed in the Fed’s separation from politics, Trump said, “I believe in the Fed doing what’s good for the country.”
He said that, unlike other countries, the US central bank has failed to support the policies of the state's administration. “We’re negotiating very powerfully and strongly with other nations. We’re going to win. But during this period of time I should be given some help by the Fed. The other countries are accommodated.”
During the Nixon administration, Fed chairman Arthur Burns bowed to pressure from the president and held rates low. It contributed to an episode of inflation, reduced eventually with interest rates of 20 per cent. Since then it has been a tradition of presidents to have limited involvement in the Fed’s policy decisions.
The Fed has raised interest rates twice this year, to the current range of 1.75 to two per cent, and has signalled that it expects to do so again in December. A growing domestic economy and strengthening employment market has led the reserve to attempt to stall uncontrolled price increases.
By contrast, the president believes that an increased borrowing cost will hinder the economy, and repeatedly outlined his preference for low interest rates.
In Tuesday morning trading, the dollar index fell 0.4 per cent. The measure reached 95.440, its lowest level for nearly a fortnight.