Trump Weighs In On The Federal Reserve: 'I'm Not Thrilled'

Presidents rarely criticize the Federal Reserve while they are in office, but Donald Trump has never been one to follow Washington conventions. On Thursday, Trump addressed the Fed interest rate hikes in 2018 in an interview with CNBC, and the market reaction shows investors were listening.

What Happened?

After praising newly appointed Fed Chair Jerome Powell, Trump pushed back on Powell's policies.

“I’m not thrilled,” Trump told CNBC. “Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it.”

Trump said he is concerned that rising interest rates might impact the coutnry's economic growth.

Why It’s Important

The Federal Reserve uses interest rate hikes to help keep inflation in check, preserve the value of the U.S. dollar and keep the prices of goods stable. Interest rate cuts are also a powerful tool to help fight economic downturns, but rates have been near zero for most of the period since the financial crisis of 2008. Returning rates to a normal level gives the Fed ammunition to potentially combat the next recession.

Trump said additional Fed rate hikes could put the U.S. at a “disadvantage” compared to other global economies; Powell said earlier this week that he believes the U.S. economy is strong enough to digest additional rate hikes. The U.S. economy is on pace to expand by about 3 percent in 2018, and economists are expecting two more U.S. rate hikes by the end of the year.

What’s Next

Investors will be watching to see how much market fallout Trump’s comments will create. Here’s a look at how a few popular investments were reacting on Thursday:

• SPDR S&P 500 ETF Trust SPY was down 0.2 percent.
• PowerShares DB US Dollar Index Bullish UUP was down 0.1 percent.
• iShares Barclays 20+ Yr Treas.Bond (ETF) TLT was up 0.6 percent.
• SPDR Gold Shares GLD was down 0.2 percent.

....The United States should not be penalized because we are doing so well. Tightening now hurts all that we have done. The U.S. should be allowed to recapture what was lost due to illegal currency manipulation and BAD Trade Deals. Debt coming due & we are raising rates - Really?

— Donald J. Trump (@realDonaldTrump) July 20, 2018

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