President Trump Donald John TrumpThe Hill's Campaign Report: Democratic Field begins to shrink ahead of critical stretch To avert recession, Trump should keep his mouth and smartphone closed Trump: & # 39; Who is our bigger enemy , & # 39; Fed boss or Chinese leader? MORE & # 39; s feud with Jerome Powell reached new heights on Friday as the Federal Reserve chairman delivered his most explicit rebuke to the president after sustaining more than a year's worth of public attacks.
In a highly delayed speech, Powell said that while the Fed may soon cut interest rates to stave off economic headwinds, the central bank is not responsible for resolving the trade conflicts run by Trump.
"Setting trade policy is the business of Congress and the administration, not the Fed," Powell said at the Fed's annual summit in Jackson Hole, Wyo.
He argued that while "monetary policy is a powerful tool to support consumer spending, business investment and public trust, it cannot provide a definite rulebook for international trade."
Trump has sought to discredit growing concerns about a downturn that could derail his reelection campaign, and he and his top aides have downplayed the fall from the trade war with China and have instead accused the Fed of controlling the US economy.
Economists say trade issues do not fall within the Fed's mandate. [1
Powell's comments furious Trump, suggesting that the Fed's top official could be a more dangerous threat to the US economy than President Xi Jinping of China.
" We have a very strong dollar and a very weak Fed. I want to work & # 39; brilliant & # 39; with both, and the United States will do well, " Trump tweeted ." My only question is, who is our bigger enemy, Jay Powell or Chairman Xi? "
Although Powell never mentioned Trump by name, his comments were seen as a clear rebuke of Trump's escalating campaign to push the Fed into a massive rate cut amid mounting turmoil for the US economy.
For more than a decade in a record-breaking stretch of economic expansion, Unemployment is at historically low levels, wages are rising and consumer spending is rising, and even as business investment has fallen and job growth has slowed, the United States is surpassing other industrialized nations.
Still, a new set of economic red flags has raised fears of an imminent US recession during economists have raised the odds of a downturn following several weeks of turmoil in the bond market, a contraction in the industrial sector and escalations
Trump has long dismissed the Fed's independence from the administration, arguing that the central bank should assist in its trade deal with China and the European Union by cutting interest rates. Lower interest rates would not only stimulate the economy, it would also make US exports cheaper in foreign markets.
Powell and the Fed have been under pressure from Trump and Wall Street to ease interest rates after touring them four times in 2018. The central bank kept interest rates stable the first half of 2019 before cutting them in July for the first time since 2008, which a hedge against global headwinds.
Powell said Friday that while the US economy seemed to be holding strong, the Fed would "act as appropriate to sustain expansion," the mirror language he used in June to open the door to a rate cut.
Ryan Sweet, director of real-time economics for Moody's Analytics, said Powell's speech "gave the markets the most they wanted" by recognizing the risk the United States faces while promising to respond to them.
"Powell appears to recognize that if the Fed does not deliver what the markets expect, financial market conditions could tighten significantly," Sweet wrote in a research note on Friday, estimating that the Fed will cut interest rates by 0.25 percentage points next month and again in December.
But a moderate rate cut is likely to do little to calm Trump, who has asked the Fed to halve the interest rate range between 2 and 2.25 percent of federal funds, and the president's pressure on the Fed is expected to grow after China announced US $ 75 billion in US goods tariffs on Friday, prompting Trump to retaliate.
Brusuelas said the Fed would only cut interest rates on Trump's requested 1 percent amid a panic-like crisis of the 2008 financial crisis, but "we are not near it right now. "
" What Mr. Trump is asking is very unusual, and it clearly has to do with his prospects for re-election, "Brusuelas said." It signals weakness and bias shuddering for the American economy, not for the sake of the economy and the people living in it, but for his political outlook. "