Trump: Fed is a Bigger Problem Than China for US Economy

Trump said on Thursday that the Fed is a bigger risk to the US economy than China because interest rates here are higher than in other countries.

Trump has called for rates to drop to zero, even as the central bank dropped rates for the third time since July. Federal Reserve Chairman Jay Powell has indicated it will be the last reduction until the economy proves it needs another stimulus. The rates are higher in the US than in Europe or Japan because the economy is stronger.

Most economists say Trump’s trade war with China — not high interest rates — is the main factor weighing on American manufacturing, one of the weakest areas of the economy, and is the chief source of the uncertainty that is slowing down business investment.

Borrowing costs are already ultralow, and leaders of top business groups say that hardly any of their members are having trouble getting loans. And while Trump is right that the dollar is strong — making American exports more expensive — that has much more to do with the relative health of the U.S. economy than with anything the central bank does.

Powell avoids interacting with the president, noting that the Fed is independent of politics to insure that the central banks act in the long term interest of the economy and not the short term interest of politics.

Source Politico