The central bank will be “derelict in its duties” if it doesn’t slash rates a third time, the president says
President Donald Trump has renewed his attacks on the Federal Reserve just days before the central bank is due to make an interest-rate decision.
The Fed has slashed interest rates following each of the last two meetings of its governing body, the Federal Open Market Committee. Trump, however, has been vocal about his desire for further cuts, saying that Fed Chair Jerome Powell – whom Trump appointed – has “no ‘guts’, no sense, no vision” for failing to cut rates further. Trump has also called Fed officials “boneheads” and “pathetic.”
On Thursday, the president renewed his attacks on the Fed, saying the agency would be failing in its job if it doesn’t cut interest rates still further. He also implied that the Fed should cut rates below zero – a move that could result in borrowers actually getting paid to take out a mortgage, but could mean it would actually cost money to have a savings account.
“The Federal Reserve is derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate,” Trump tweeted. “Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money. Fed was way too fast to raise, and way too slow to cut!”
Other countries are experimenting with negative rates – the European Central Bank’s current policy interest rate is -0.5% and the Bank of Japan’s rate is -0.1%.
However, the net benefit of negative rates is still largely theoretical.
“As of 2016, this has been the effect of negative interest in the countries it has been tried,” market watcher Jack Derwin said in an August think piece in Business Insider. “With the exception of Sweden, which saw a modest improvement, the other economies actually worsened, leaving the track record of negative interest rates unproven.”
The Federal Reserve is widely expected to cut interest rates by another quarter-point next week, bringing rates down to 1.5% to 1.57%. However, Goldman Sachs economists predict that next week could be the last rate cut for a long while, according to a CNBC report.
