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

Eileen GuzmanOct 14, 2018

We've got Donald Trump tweeting about whatever crosses his mind at a given moment; we've got the news media and the political world reacting to Trump and to each other, consuming vast amounts of intellectual oxygen; we've got outrage and ranting emanating from all over the political and geographical maps.

U.S. President Donald Trump blamed "crazy" policies of the Federal Reserve for contributing to financial market turmoil, although a White House spokesman said Thursday he was not trying to dictate Fed policy.

"When you talk about economies, our economy is far better than that".

You see, rate hikes are a delicate phenomenon.

Flash forward to today: The economy is on a roll, with growth in the nation's gross domestic product topping 4 percent between April and June and on pace to eclipse 3 percent in the third quarter. The index fell by more than 3%.

US stocks tumbled for a second straight session on Thursday as volatility reigned on Wall Street amid worries about higher interest rates and trade wars.

Though the Fed has been raising its overnight target policy rate, a benchmark for lending costs overall, the current level of between 2 and 2.25 percent remains just half the average set by the Fed between 1990 and the start of the 2007 to 2009 recession.

Since then, longer-term rates have risen faster than shorter-term ones. Dow's two-day losses account for almost 1,400 points, Nasdaq is into correction territory, dropping 10 percent from all-time highs.

He reiterated those comments during an interview on Fox & Friends Thursday morning, claiming the central bank was being too "aggressive". "It's reflecting the possibility that this recovery has further legs". In discussing the Federal Reserve's increase in interest rates, Ann Owen reminded listeners that interest rates are still very low.

Sees core CPI moving to the high 2's% in the future.

Throughout the Fed's tightening cycle, which began at the end of 2015, financial conditions have been relatively easy.

"The Fed's more-restrictive stance has joined with other signals to unsettle investors even as major United States indexes rose to new highs", the financial daily said.

But the Fed has repeatedly explained the justification behind the three interest rate increases this year, and Trump's own policies are contributing to the case for the moves, including steep tax cuts, increased deficit spending, and the trade conflict with China. But as the campaign has continued, the attention of markets has increasingly turned to when the Fed would stop raising rates. And I have a lot more to do if I want to do it and I don't want to do but they have to come to the table.

There are millions of working families with credit card debt and raising interest rates is not going to help any of these people.

Mnuchin said there is a normalization in the yield curve on bond markets. "The trend is clearly up, and the market is betting that will continue".

"The fundamentals and future of the U.S. economy remain incredibly strong", press secretary Sarah Sanders said in a statement after the close.

Of course, there are downsides to the higher rates.

Rates a big part of selloff. Housing has already shown softness in some markets in recent months.

The market has been rattled by rising interest rates, signs of a slowdown in the global economy and the US-China trade dispute. The lower the discount rate, the less expensive it is for the bank to borrow, and therefore, the lower the rate will be when the bank loans out money for major purchases.

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