Trump urges the Fed to cut prices by 1%, encouraging more quantitative relief
President Donald Trump, in his most controversial attack, nonetheless on the Federal Reserve, requested the Central Bank to cut interest rates by 1 percentage point on Tuesday and implement more money-printing quantitative easing.
In a two-part tweet, the president unfavorably compared the Fed to his China counterpart and said whether monetary policy in the US was looser, the economy would "go up like a rocket."
Earlier, White House officials including Trump and top financial adviser Larry Kudlow have recommended Fed cut prices by half a point. The twins literally doubled down on this approach.
The Fed is currently targeting the reference price in the range of 2.25% to 2.5%. It has hiked the frequency nine times since December 201[ads1]5, although it indicated in March that it has probably been done with increases for the rest of 2019 despite predicting two more at the end of last year.
Following the president's prescription, it would feed the funds return to the level in December 2017.
Jawboning for price reductions comes despite another strong economic development in the first quarter. GDP rose robustly 3.2% after many economists had predicted little or no growth during the release.
Growth has come with little inflation. Fed's preferred gauge showed a gain of only 1.6% over the past year, excluding food and energy prices.
This lack of inflation is the reason why Kudlow and others believe that the Fed can reduce risk without risk. Central banks normally tighten the policy in an attempt to control prices when the economy expands.
Although it is not uncommon for presidents to criticize monetary policy, it has historically been silent, making Trump's public condemnation of chairman Jerome Powell and his colleagues atypical.
Along with several calls for price reductions, this is Trump's second demand for more QE.
The Fed launched three rounds of relief during and after the financial crisis to lower long-term rates and encourage cash flow in risk benefits such as stocks and corporate bonds. There have been no indications that the Fed is considering another round of QE, although economists at the St. Louis Fed have been floating the idea of a buy-back facility that some economists say would act as a form of relief.
