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Home / Business / Trump's Fed attack happens for a simple reason

Trump's Fed attack happens for a simple reason



President Trump has lobbed grenades at the Federal Reserve every chance he gets, calling the central bank to be "too tight" and hurt the economy.

The President has repeatedly accused the Fed of slowing US economic growth by hikeing interest rates too fast and implementing, among other things, quantitative tightening. This is because central banks around the world are cutting rates, making it more difficult for the United States to compete when global currencies fall.

"The economy is doing GREAT, with tremendous upside potential!" Trump tweeted Thursday. "If the Fed wanted to do what they were supposed to do, we're a rocket up!"

The president's attack on the central bank comes as candidates prepare for the 2020 elections. Historically, a healthy economy could pave the way for a victory in the White House.

"The economy, stupid."

Remember the words of Clinton campaign strategist James Carville in 1

992, "The Economy, Stupid."

President Bill Clinton's 1992 election victory against George HW Bush was the last time a US president lost a reelection. It was also the last time an election occurred within 24 months of a US recession.

Ryan Detrick of LPL Financial shattered the numbers and found that since the First World War, the incumbent US President has been a perfect 11 for 11 if the economy was not in a recession within 24 months of an election.

The presidents who oversaw a recession before an election lost five of seven campaigns, he said.

MORE ON FOXBUSINESS.COM [19659011] While the US economy is growing, with a revised estimate of gross domestic product in the second quarter, increasing by 2 percent as reported by the Department of Commerce on Thursday, it is down from 3.1 percent growth in first quarter.

Slower growth combined with yield curve inverting for the first time since 2008, recession fears of reaching a fever pitch. The inversion has occurred ahead of the last seven recessions, spanning more than 50 years.

While some on Wall Street think this time is different about the outcome of the yield curve inversion, a team of Bank of America Merrill Lynch economists warned three of the top five best economic indicators of the business cycle (car sales, industrial production and total hours) are " flashing yellow "and are near levels consistent at the beginning of previous recession. However, they say without a doubt that the "most reliable early indicator", the first unemployment requirements, is still very low. US unemployment also hovers at 3.7 percent, several years low, from July.

The bank's official model suggests a 20 percent chance that a US recession will happen over the next 12 months, but economists say the data and events lead them to believe it's more than one in three.


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