Trump Calls for Fed’s ‘Boneheads’ to Slash Interest Rates Below Zero

He concluded by calling Mr. Powell, whom he nominated to head the central bank in 2017, and his Fed colleagues “Boneheads.”

[Read more about Mr. Trump’s feud with the Fed, which is rooted in history.]

Mr. Trump’s request is extraordinary for several reasons. The United States economy is still growing solidly and consumer spending is strong, making this an unusual time to push for monetary accommodation, particularly negative rates, a policy that the Fed debated but passed up even in the depths of the Great Recession. It is also typical for countries with comparatively strong economies to pay higher interest rates, not the “lowest” ones.

But Mr. Trump is facing an economic slowdown in the United States as the effects of his trade war with China and slowing global growth begin to rattle consumer confidence and threaten business investment, particularly in the manufacturing sector. With the 2020 election looming, Mr. Trump has begun looking for ways to keep the economic expansion going strong. Along with calling on the Fed to lower rates, he’s also mulled additional tax cuts.

The president’s call for negative rates is a significant escalation from what the White House was demanding from the Fed even six months ago. Mr. Trump and his colleagues have quickly gone from calling for a moderate rate cut to urging negative borrowing costs.

Mr. Trump’s economic advisers met on Wednesday to continue discussing ways to push through more tax cuts, such as a payroll tax cut, along with the legality of using executive authority to index capital gains to inflation, according to an administration official. Treasury Secretary Steven Mnuchin, who attended the meeting, said on Tuesday that the Trump administration would be examining “tax cuts 2.0” as something to consider in 2020.

Article source: https://www.nytimes.com/2019/09/11/business/economy/bonehead-trump-jay-powell.html?emc=rss&partner=rss