Donald Trump says Federal Reserve is 'out of control'

Donald Trump says Federal Reserve is 'out of control'

Donald Trump says Federal Reserve is 'out of control'

That is bad news for homebuyers and other prospective borrowers.

US President Donald Trump said yesterday's stock market selloff was in fact a long awaited "correction", and that the Federal Reserve, which has been raising US interest rates, has gone "crazy".

"The US tech bubble may take a while to burst and we are facing many external uncertainties - trade wars, risks in emerging markets currencies and oil price".

Trump, who departed for Erie just before markets closed on Wednesday, was briefed by officials about the sell-off. Higher interest rates makes it more expensive to borrow money, giving consumers or businesses pause before taking out a loan.

He said the stock-market drop is "a correction that I think is caused by the Federal Reserve with interest rates".

The unemployment rate in September dipped to 3.7 percent, a level not seen in almost half a century, while an inflation report on Thursday indicated the pace of price increases remained under control around the Fed's target. Even before Trump's comments, the dollar was down from a 7-week high after a fall in U.S. bond yields. Even at the projected 3.25 percent in the Funds at the end of 2019, the potential reduction is well below the peaks of 550 and 525 basis points at the beginning of the last two rate reduction cycles. The central bank "is too tight", he added. "It's reflecting the possibility that this recovery has further legs".

However, he acknowledged higher rates helped savers.

The yields of inflation-protected bonds have moved mostly in lock step with traditional bonds in recent weeks, suggesting that traders haven't become more anxious about inflation.

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Gold prices rose Thursday as global stock sell-off and softer dollar led investors to seek a safe haven in the metal.

Trump also told reporters in the Oval Office Thursday morning that he knows monetary policy better than the Fed's leaders and continued criticizing them for interest-rate increases.

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

In previous years, financial markets have been doubtful that the Fed would follow through with its forecasts for rate increases.

Stanley Fischer, the former Fed vice chairman, anxious in an October 3 interview that Trump's pressure could have a subtle impact on policy.

Trump had blamed "crazy" Fed policies for contributing to current financial market turmoil as a global sell-off continued amid stronger signs of rising financial volatility which the International Monetary Fund and the World Bank were scheduled to address during their annual meetings.

Sears has closed hundreds of stores and sold several famous brands or put them on the block as it sees more customers abandon its stores.

Trump's politicking with interest rates has the potential to backfire.

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Former Treasury Secretary Larry Summers said the economy was on a "sugar high" that had been fueling stock prices. "The trend is clearly up, and the market is betting that will continue".

Of course, there are downsides to the higher rates.

Stocks in Asia and Europe took even steeper losses.

And the housing sector is especially sensitive to the longer-term interest rates set on the bond market, which in turn determine mortgage rates.

So what caused Wall Street's worst day in eight months, just days after USA indices touched record highs? "I think what they're doing is wrong", Trump said.

If rates to 4%, then equities go lower.

And while stocks could get a boost from strong corporate earnings, there are concerns the USA trade conflicts will start to undermine profits.

MARKET MELTDOWN: Global Markets Reel, But Dow Turns Positive
Meanwhile struggling retailer Sears was in focus as the Wall Street Journal reported that it was preparing to file for bankruptcy. Investors see many of these countries as being vulnerable to higher USA interest rates, which can pull away investment dollars.

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