Trump Doubles Down on Criticism of ‘Aggressive’ Rate Hikes By the Fed

October 11, 2018 Updated: October 12, 2018    

WASHINGTON–President Donald Trump launched a second day of criticism against the Federal Reserve on Oct. 11, calling its interest rate increases a “ridiculous” policy that was making it more expensive for the federal government to finance deficits.

“I’m paying interest at a high rate because of our Fed. And I’d like our Fed not to be so aggressive because I think they’re making a big mistake,” Trump said on Oct. 11 on Fox & Friends.

It was his second broadside against the central bank in the last 24 hours, following a sell-off on Wall Street partly attributed to investors fully adjusting to the central bank’s steady rate increases, and an uptick in particular in yields on long-term Treasury bonds that are an important, more secure alternative to stock investments.

The president’s remarks were quickly qualified by National Economic Council Director Larry Kudlow, who said the Fed was “on target” in policies that were responding to a strong economy.

The rise in interest rates is “a sign of economic health, that is something to be welcome and not feared,” Kudlow said on CNBC. “The president is not dictating policy to the Fed. … They are independent. They are going to do what they are going to do.”

Trump himself later told reporters he would not try to oust Powell, Trump’s handpicked successor to former Fed chair Janet Yellen, and a well-regarded insider in moderate Republican circles. He took over just eight months ago, largely continuing policies set in motion by Yellen.

Past presidents have criticized the central bank, but the recent run of invective was unusual even for Trump. Since the close of the trading session on Oct. 10 on Wall Street he has called the Fed “crazy,” “loco,” “ridiculous,” and “too cute,” while saying its rate increases are “too aggressive,” and “a big mistake.” U.S. stocks opened lower on Oct. 11 but seesawed between losses of as much as a percentage point and small gains.

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.

“The problem that I have is with the Fed. The Fed is going wild. I mean I don’t know what their problem is but they are raising interest rates and it’s ridiculous,” Trump said on Oct. 10. “The problem in my opinion is Treasuries and the Fed. The Fed is going loco and there is no reason for them to do it and I’m not happy about it.”

A Fed official said the central bank would not comment on the president’s remarks. The central bank raised interest rates last month, and is expected to do so again in December.

The gradually rising rates, Fed officials say, are meant to guard against any quick run-up in inflation, while remaining low enough so far for the recovery and a strong run of job growth to continue.

The policy could eventually bite harder into parts of the economy that are both sensitive to interest rates and connected to politically important industries, such as autos and home construction and sales.

By Doina Chiacu, Susan Heavey, Howard Schneider, and Jeff Mason