U.S. President Donald Trump is putting pressure on the Federal Reserve (Fed) to make more interest rate cuts to remain competitive with other countries. Trump declared that economic slowdowns are the fault of central bankers, not China.
"They must Cut Rates bigger and faster," Trump said in a series of Wednesday morning tweets just one week after the Fed cut the central bank benchmark lending rate for the first time in more than a decade.
"Our problem is not China," Trump added. "Our problem is a Federal Reserve that is too … proud to admit their mistake of acting too fast and tightening too much (and that I was right!)."
Trump has been a frequent critic of the Fed. The tweets are his latest demand for the central bank to cut rates to stimulate the U.S. economy before the 2020 presidential election.
While the U.S. economy continues to expand, it is growing at a slower pace. The economy grew at a 2.1 percent annual rate in the second quarter, significantly slower than the previous quarter, according to the U.S. Bureau of Economic Analysis. Growing worries about an economic slowdown prompted more investors to leave stocks and shift their money to less risky U.S. Treasury bonds, even though they offer lower returns.
Many market analysts expect the Fed to cut interest rates again in September and possibly two other times before the end of the year.
Trump's worsening trade war with China has fueled concern of a U.S. and global economic slowdown. Fed chairman Jerome Powell said the most recent interest rate cut was needed to bolster economic growth threatened by uncertainty in U.S. trade policy.
Push for independence
As Trump hammers the Fed, four former leaders of the central bank spoke out in favor of its continued independence. In an opinion piece published Monday by the Wall Street Journal, Ben Bernanke, Alan Greenspan, Paul Volcker, and Janet Yellen said an economy is strongest and functions best when the Fed acts independently and relies on sound economic data and principles.
"Even the perception that monetary-policy decisions are politically motivated, or influenced by threats that policy makers won't be able to serve out their terms of office, can undermine public confidence that the central bank is acting in the best interest of the economy. That can lead to unstable financial markets and worse economic outcomes," the former Fed leaders wrote.
Trump has even reportedly discussed an attempt to remove Powell from his position, raising questions about the central bank's independence. Powell has repeatedly emphasized the Fed's commitment to independence and said he fully intends to serve the entire four-year term.