Trump, Kudlow sing different tunes on the Fed amid market drop

Jermaine Castillo
October 14, 2018

If the U.S.is not careful, other countries around the world can lend at lower rates than the USA and continue to stimulate their economies through smart lending and smart exporting. Apple plunged 4.6 percent on Wednesday, and Microsoft fell 5.4 percent, their worst days in almost two-and-a-half years.

Spot gold climbed 0.8 percent to reach $1,203.30 an ounce by 0947 GMT.

Higher deficits lead to a lower us dollar. Among the hardest hit areas of the market were those that had earlier been the biggest winners, such as technology stocks. Using target-date funds as a benchmark, Thompson said a person at age 25 might have a fund that's about 10 percent bond funds and the rest in a mix of equities - a more growth-oriented portfolio.

China Mobile shares fell 3.7 per cent, insurance group Ping An dropped 4.2 per cent and China Construction Bank lodged a slide of 3.2 per cent.

Another problem is that higher interest rates could cause the USA government deficits to balloon.

This could lead to stock market sell-off (something we are already starting to see).

Federal Reserve in Trump's line of fire but unlikely to change course
But, crucially, the higher long-term interest rates don't seem to be driven by expectations that inflation will soar higher. Trump's blunt public criticism of the Fed, which began this summer, is without precedent.

While economists may disagree about the exact pace of interest rate hikes, raising rates now - gradually, after keeping them at historically low levels for more than a decade - is hardly "loco".

Risk remains out of favour following yesterday's big drop in global stock markets.

For example, the USA government is now in a trade war with China.

Rising rates may already be pinching parts of the United States economy, particularly housing and the auto market.

President Donald Trump slammed the Federal Reserve as "going loco" for its interest-rate increases this year in comments hours after the worst usa stock market sell-off since February.

Speaking shortly after Trump lambasted the Federal Reserve for being "too aggressive" in raising interest rates, Larry Kudlow, head of National Economic Council, said the president was not trying to influence monetary policy.

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Traditionally, presidents have avoided publicly commenting on Fed policy. "He didn't say anything remotely like that", he said on CNBC.

U.S. stocks, which recently hit new all-time highs, are now in the midst of an October slump, sliding sharply because investors are anxious about rising interest rates.

U.S. Treasury Secretary Steven Mnuchin, meanwhile, said that Wall Street's rout was a natural correction and not caused by any particular factors.

In a speech before the press briefing, Mr. Williams reiterated that a bright economic outlook calls for more central bank interest-rate increases.

Mnuchin, speaking to reporters on the sidelines of the International Monetary Fund and World Bank annual meetings in Bali, also said that Chinese officials had told him that they did not want to see a further depreciation of the yuan's exchange rate, an issue that the USA has been very concerned about.

The policy makers' latest economic forecasts showed a median estimate of 3% for this neutral point over the long term. "They're so tight. I think the Fed has gone insane", he said. "I mean, I don't know what their problem is that they are raising interest rates and it's ridiculous", Trump told Fox News. "But I think the Fed is far too stringent, and they're making a mistake, and it's not right".

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About 38,000 people signed a petition, organized by campaign group Republic, against taxpayers' money being spent on the occasion. Finally, there's Eugenie's grandfather Prince Philip, who still remains a question mark on whether he will attend.

Trump's public criticism of the Federal Reserve, whose chairman, Jerome Powell, Trump appointed, is a sharp departure from his recent predecessors. While he was generally upbeat about the U.S. economy, predicting that the good news could continue "effectively indefinitely", when asked on October 3, 2018, what keeps him up at night, Powell said, "Basically everything".

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