US Dollar Sinks as President Trump Hits Fed on Hikes

Jul 23, 2018, 01:16
US Dollar Sinks as President Trump Hits Fed on Hikes

U.S. President Donald Trump on Friday said he was ready to impose tariffs on all $500 billion of imported goods from China, threatening to escalate a clash over trade policy that has unnerved financial markets.

Trump's tweet on Friday followed more extensive criticism he made of the Fed's rate hikes in an interview with CNBC in which he said, "I don't like all of this work that we're putting into the economy and then I see rates going up".

Earlier this month, the United States imposed tariffs on US$34 billion of Chinese imports.

Feroli also noted that the easiest way for Trump to bend the Fed to his political will would be to fill the Federal Reserve Board of Governors with members that agreed with a low interest rate policy or were personally connected to the president. "Because we go up, and every time you go up, they want to raise rates again".

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As president, Trump past year said Yellen had "done a good job" and said he liked that she's "historically been a low-interest-rate person". "If I lose $100 an acre, and you take the acres that I farm, it's a lot of money". "We are being taken advantage of and I don't like it", he said.

His allegations that China and the European Union are manipulating currencies are at odds with a Treasury Department report released in April that did not name any country as a currency manipulator.

But his comments raised alarms, including with some former Fed officials who saw in his remarks a possible effort to apply public pressure on the central bank. The aide said Trump is being told by his confidantes that the central bank is moving properly and that it would be best to let monetary policy play out. The Fed has been carefully and gradually raising rates over the past several years to keep inflation in check and to prevent the economy from overheating.

The Fed has raised interest rates twice in 2018, and is expected to issue at least two more rate hikes before the end of the year. "We have been ripped off by China for a long time", he said. "I'm doing this to do this right thing for our country".

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The White House also attempted to assuage fears of the president pressuring the Fed immediately after Trump's comments were released.

The Chinese yuan and the euro have both lost value against the dollar this year, though in 2017 the dollar had its worst year since 2003. Yields on Treasuries climbed the most since May as Trump reiterated that he's unhappy with the Federal Reserve tightening after the administration has worked so hard to grow the economy.

Powell has said he believes the economy is strong enough for the Fed to continue normalizing rates, which were held at a historically low level during the recovery.

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