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giftedviz.com October 17, 2018


US President Trump calls the US Fed 'crazy', stock declines a 'correction'

11 October 2018, 12:28 | Austin Hogan

US President Trump calls the US Fed 'crazy', stock declines a 'correction'

President Trump speaks to reporters while departing for travel to Iowa from the White House in Washington

President Donald Trump says the Federal Reserve "has gone crazy" after a major drop in stock prices Wednesday.

Trump's use of the word correction to describe the sell-off could be significant. A stock market correction is defined as a fall of at least 10 per cent from the high point of the last 52 weeks.

Trump's remarks, almost unprecedented for a USA leader, may roil markets further in retreat on the heels of hefty tariffs imposed on aluminum and steel imports from much of the world, and about half of US imports from China. It has fallen almost 5% from its all-time closing high on September 20.

The Nasdaq has fallen 8.5 percent from its record closing high on August 29. An additional 1.5-percentage-point fall would confirm a correction for that index.

Stocks have sold off in recent days on worries about higher borrowing costs.

Powell's goal is to extend the second-longest USA economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth. "It's so tight. I think the Fed has gone insane", Trump told reporters shortly after markets closed, as he arrived in Erie, Pennsylvania for a rally.

The S&P 500 was also down 3% while the tech-heavy Nasdaq lost 4%.

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Stocks have been under pressure since the yield on 10-year US Treasury bonds jumped above three percent last week, a sudden move that raised fears of an overheating economy, speeding inflation and more aggressive Federal Reserve interest rate increases.

Mr. Trump said earlier this week that he thought the central bank was moving too quickly with a series of planned interest rate hikes. "I think the Fed is making a mistake", he said before a rally with his supporters in Erie, Pa. "But I really disagree with what the fed is doing. OK?"

US presidents have rarely criticized the Fed in recent decades because its independence has been seen as important for economic stability. "That suggests the Fed will keep raising rates, and that's taking the wind out of the stocks that have done the most, particularly in the tech sector".

The Federal Reserve is mandated by Congress to aim for low inflation and low unemployment.

"Clearly stocks are spooked by higher rates and maybe some inflation that seems to be creeping in", said Michael Farr, CEO of Farr, Miller & Washington.

Trump was briefed on the market turmoil earlier in the day, a White House official said.

Tokyo's Nikkei 225 index plunged 915 points (3.9%) to end at 22,591, while the Hang Seng index in Hong Kong had tumbled nearly 4% in late trade.



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